ADVOCACY ISSUES
Terrorism Insurance

The Building Owners and Managers Association (BOMA) International urges state and federal governments to play a role in ensuring that commercial property owners can continue to obtain coverage for damage from acts of terrorism, at reasonable and affordable rates.

The acts of terror on September 11, 2001 cost the insurance industry billions of dollars. Following the terrorist attack, many owners of commercial properties were advised that their policies would not be renewed or that their new policies would exclude terror/war risks. Without adequate insurance, it is difficult, if not impossible, to operate or acquire properties, refinance loans, and to sell commercial-backed securities. Disappearance of coverage for terrorist acts for real estate and other businesses could severely disrupt the economy.

After more than a year of intense advocacy efforts, BOMA scored a huge victory when Congress passed the Terrorism Risk Insurance Act of 2002 on November 19, 2002. President Bush signed the bill into law one week later.

Under the new law, federal funds of up to $100 billion will be made available to cover losses from a terrorist attack. The federal government's share would be 90% of losses above the deductible. Insurance company deductibles would be set at 7% of premiums the first year, 10% the second year, and 15% the third year. The program will be in place for three years. BOMA International and Congressional leaders are confident that these provisions will ease many of the problems building owners have faced in finding available terrorism insurance coverage at reasonable rates and terms. Once the three-year period is over, the insurance market for terrorism coverage should be sufficiently developed to continue offering coverage absent government involvement.
The new law will also consolidate civil lawsuits stemming from a terrorist attack in a single federal court for trial under the laws of the state in which the attack took place.

While BOMA International had sought more stringent punitive damage language, this provision is intended to prevent property owners from facing multiple claims in multiple jurisdictions from the same terrorist attack.

The Department of the Treasury must now work to implement the new law. By the end of 2002, the Treasury Department had circulated “interim guidance” while they worked to draft final regulations. On February 25, 2003, they released the first round of draft regulations. BOMA International joined forces with the Coalition to Insure Against Terrorism (CIAT), a broad-based coalition representing 64 trade and professional associations, to submit comments on the Interim Final Rule and the progress to date in implementation of the Terrorism Risk Insurance Act of 2002.

BOMA International will continue to be involved throughout this regulatory process to ensure that the new law fulfills the legislative intent of easing the terrorism insurance crisis that should ultimately lead to reasonable rates and terms.

CIAT’s Comments to the Department of Treasury go to:
http://www.Bomaweb/boma.org/advocacy/Treasury Dept Comments.pdf