“Going bare” may make you think of summertime skinny-dipping, but unfortunately, it’s not nearly that much fun. In the world of risk management, “going bare” means forgoing insurance, and these days, the dearth of, and newly prohibitive expense of, property/casualty and liability insurance against possible terrorist attack are forcing many businesses to go bare whether they like it or not.
In response, a number of trade associations and companies have joined forces to advocate in Washington on behalf of business insurance policyholders. Members of the Coalition to Insure Against Terrorism (CIAT) include the National Association of Real Estate Investment Trusts (NAREIT), the National Association of Manufacturers, and the U.S. Chamber of Commerce. Even the National Football League, many of whose teams and stadiums have been unable to procure reasonably priced insurance against terrorism, has joined the coalition.
“In commercial districts, and especially for trophy buildings, you’re seeing quotes for terrorism insurance premiums in the stratosphere, up to 10% of the insured value,” says Tony Edwards, senior vice president and general counsel for NAREIT. And the price hikes aren’t even limited to big-city downtowns. “We have a member that owns numerous shopping centers in the South,” says Edwards. “You wouldn’t think a shopping center in suburban Amarillo would be on the top of the list for a terrorist attack, but the quote they got was out of this world.” Unable to justify the expense to their investors, the company opted to go without. “And if they did have an event, it would be a complete loss,” says Edwards. “We question whether that is the equitable way of apportioning societal risk.”