Six in 10 businesses now buying terror coverage, Marsh reports

Nearly six in 10 large and mid-sized U.S. businesses obtained insurance to cover property terrorism risks during 2005, a dramatic increase from the 2003 average of 27 percent and up from 50 percent in 2004.

Meanwhile, the cost of property terrorism insurance in 2005 was 25 percent lower on average than the 2004 rate.

A new report from insurance firm Marsh Inc. finds the purchase of property terrorism insurance in 2005 varied considerably, depending on a company’s total insured values, location, and industry sector.

The report is based on data compiled from 1,623 businesses and government entities that purchased or renewed property insurance policies in 2005.

Notably, while smaller companies (those with total insured values less than $100 million) were far less likely in the past to purchase this coverage, nearly half of them did so in 2005.

Take-up rates–the percentage of companies buying the coverage–varied considerably by region: about 67 percent of firms in the U.S. Northeast and 58 percent of Midwest firms purchased property terrorism insurance in 2005, compared with 53 percent in the West, and 50 percent in the South.

Take-up rates increased most dramatically in the West–to 53 percent from 34 percent in 2004–and in the Northeast, where the take-up rates rose to 67 percent in 2005 from 53 percent a year earlier.

“There’s an increasing awareness of terrorism among businesses across the country,” said Robert Blumber, a managing director in Marsh’s North America Property Practice. “Clearly, businesses and their leadership at the highest levels recognize that this exposure is likely to be with us for some time and that insurance can help them address some of the financial consequences of this risk.”

Within specific industry sectors, financial institutions, real-estate firms, and health-care facilities had the highest overall take-up rates, each exceeding 75 percent. In addition, media companies, those in hospitality, transportation, food and beverage, technology and telecommunications, and educational institutions all had take-up rates above 60 percent.

Source: Marsh Inc.