Terrorism Insurance: All Of America Needs It

Neal Peirce

WASHINGTON--It is welcome news that the rebuilt side of the Pentagon--the very spot where a fully fueled jet plane seized by terrorists struck at 345 miles an hour last Sept. 11--has been chosen for a memorial ceremony this Wednesday morning (Sept. 11).

A great nation ought to show courage, unity, defiance. The near-miracle of the Pentagon's rapid reconstruction is a way to celebrate the skills and round-the-clock labors of the engineers and construction workers who made it happen. And who would argue over the $740 million cost?

But there's a new issue in this era of global terrorism: Are we Americans ready to make the same pledge of collective commitment in response to terrorist attacks on any kind of target in America--whether it's military, government or civilian?

The issue was partly engaged in the debate about how many billions of federal dollars should be transferred to New York to recover from the destruction of the World Trade Center. About $21 billion in federal aid has now been pledged.

But Sept. 11's damage cost private insurance firms at least $40 billion. Before last September, terrorism coverage was an almost cost-free add-on to commercial property insurance. Today, the price has soared, and in many locations it is not to be had at all.

The International Economic Development Council (IEDC), a Washington nonprofit located two blocks from the White House, got a big jolt last spring when Liberty Mutual, one of the nation's largest business insurers, refused to renew its property insurance. "Non-renewed due to catastrophic exposure," said the Liberty Mutual notice.

Jeff Finkle, IEDC's president, attacked the insurer for "red-lining" the White House and its environs, asserting:

"It's true the White House would make the short list of any terrorist group's tactics. But so would schools, universities, sports complexes, bridges, tunnels, power plants, reservoirs and tens of thousands of other landmarks and installations across the country. Is every business in Fort Lee, N.J., uninsurable because it's close to the George Washington Bridge? Is the Presidio out of luck because it's next door to the Golden Gate?"

Liberty Mutual did have a response--that it and other insurers took a massive hit from Sept. 11 claims, and that if similarly grave attacks reoccur, "reserves of many insurers would be wiped out, and some companies could go out of business."

By June, surveys found insurance premiums for showcase properties and large institutions in New York and Washington had risen 50 percent to 100 percent. Some cases were worse: insurers for George Washington University, with a campus in downtown Washington, cut the school's former property and casualty insurance in half, raised its premium 160 percent, and said renewing terrorism insurance would cost 15 times more.

The pattern began to look nationwide. From Baltimore's Camden Yards baseball stadium to the Marriott Library at the University of Utah, major installations were "left bare" in case of terrorist damage. Forty-five states allowed insurers to limit or exclude terrorism insurance from their policies.

The positive news is that Congress may soon step in with a federal "backstop" assistance if insurers' losses reach a high threshold. A House-passed bill would repay 90 percent of property and casualty claims after losses in a terrorist attack exceed $1 billion. A Senate bill is similar, but only kicks in after $10 billion in claims. The bills differ on whether the insurers would have to repay later, and the civil liability of businesses hit by terrorists.

Of course, insurers are clamoring for passage. But the object ought to be affordable insurance in all of America's communities. And not getting lost in side issues.

President Bush for example, wants Congress to act but focuses almost exclusively on the billions of commercial construction projects he asserts have been delayed by shortage of affordable insurance. "We need," he says, "a terrorism insurance bill to get American hard hats back to work."

OK, Mr. President, but isn't it far more important that the nation assure all its businesses, institutions, its cities great and small, that the country will stand behind them if they happen to be the victims of any form of terrorist attack? And not just foreign terrorism, but domestic too (remember the Murrah Building?).

We've had a lot of flag-waving in the last year. Our foreign policy, many feel, has taken on an adventurist "go it alone" tone that may bode ill for our future relationships around the globe.

But a sure, firm message, audible from Kabul to Kalamazoo, would be a declaration: Military action will not be our sole response to any future terrorist acts. We will also use our collective strength to rebuild any community struck by terrorism, from the environs of the White House to remotest rural America.

Neal Peirce's e-mail address is nrp@citistates.com.