Fears of a terrorist attack leading up to the November presidential election may be fueling added demand for property terrorism insurance. Marsh, a major risk and insurance services firm, recently found that the take-up rate — or the percentage of policyholders who buy terror coverage — increased from 44% at the end of March to 46% at mid-year. Pricing also appears to have stabilized, reports Marsh, which analyzed the purchasing patterns of 807 companies renewing their property policies between April 1 and June 30, 2004.

In November 2002, President Bush signed the Terrorism Risk Insurance Act (TRIA) into law. TRIA made it illegal for providers of property & casualty (P&C) insurance to exclude terrorism coverage in their policies. Still, the act did not specify how much insurers could charge for the coverage, and as a result, the price for TRIA coverage varied greatly.

Dramatic pricing fluctuations still exist between industries, Marsh found. The construction industry, for example, experienced a 300% increase in median pricing between the end of March and midyear. Conversely, the median rate for the habitational (apartment) and hospitality industries fell by nearly three-fifths over that period. After the construction industry, the industries that posted the highest rates of increased pricing were energy, media, habitational/hospitality, real estate, financial institutions and public entities.

Terrorism insurance demand also is dictated by geography, reports Marsh. Take-up rates were the highest in the northeastern U.S. during the second quarter, followed by the Midwest, West and South. Interestingly, take-up rates in the southern region fell by 20% between the end of the first and second quarter. The Northeast and West posted their highest levels of take-up rates at midyear, however.