Deals Continue Despite Lack of Terror Insurance.(Brief Article)

One year after the availability of terrorism insurance for commercial property became an issue, in the aftermath of the destruction of the World Trade Center complex, the commercial real estate market is adapting to the situation and deals are largely going forward.

And a plan to provide a government backstop for terrorism insurance is now on hold while differences between House and Senate versions of the legislation are being ironed out.

While two industry participants believe that the introduction of such legislation will make terrorism insurance more widely available (and smoothen the financing of the larger projects that have been impacted), at least one person is skeptical about that.

Rick Pullman, senior vice president and co-head, Meeker Sharkey Financial Group (Fleet Insurance Services), Cranford, N.J., believes that some of the major companies - Lexington, Lloyds of London, Berkshire Hathaway, Axis Specialty and Ace U.S.A. - that are providing terrorism insurance are beginning to reach the limits for coverage in larger metropolitan areas.

Mr. Pullman said, "Beginning in the early summer, it started becoming more difficult to secure adequate limits of insurance particularly in Manhattan, Chicago and Washington, D.C. In fact, some companies are pretty much at their limit for writing coverage in those locations. If you get outside of those major areas, by and large coverage is readily available and the cost depends upon property type and limit of insurance."

He believes this is because insurance carriers can only expose themselves to a certain maximum limit that they are comfortable with and "they have already reached that limit."

Even then, originators are now more comfortable going forward with making loans, after having thought through the issues.