Property coverages have been affected most dramatically in all areas inclusive of capacity, premium retentions and coverages. The increases have been broad based and in some cases, coverage simply not available.

Terrorist exclusions have gained momentum with several insurers already adding these exclusions onto the policies. The current Terrorist exclusions to our knowledge have not been approved by any legislative governing insurers in the U.S. or Canada.

The U.S. (via President Bush) has proposed a three year plan to support Terrorism coverage. In 2002, the President’s plan calls for top Insurers to pay 20% of the first $20 billion of claims for Terrorism events, with the government picking up 80%. The government will then pay 90% of the next $80 billion of claims. In subsequent years to the end of 2004, private insurers would pay an increase for Terrorism related losses, with the government a smaller portion. To date, the legislative bodies have not approved this plan, although it is clear that there must be collaboration between the insurance industry and the government to resolve this issue, as the repercussions are far reaching. For example:

Almost all leases and debt instruments have clauses, which state “that additional coverage can be requested if it is deemed reasonable by the landlord or debt holder”. In short, the landlord and/or financial institution will not wish to become the insurer, especially on large real estate, since they do not anticipate a Terrorist exposure and did not price their instruments accordingly. Further complications exist since the Industry is now offering limits up to $25 million for “Terrorism Coverage”. These limits are clearly inadequate for large real estate and their costing is exorbitant relative to the exposure. In many cases the Terrorism Exclusion being requested is broader than the available coverage.

The Terrorism Exclusions that the insurers are anticipating have no consistency in language and in fact, those that we have reviewed often times, not exclude Terrorism, but some basic Property perils, such as vandalism, malicious mischief, strikes, riots and civil commotion.

On all renewals, we are trying to maintain the status quo, I.E. no Terrorism exclusions and when it is impossible, we are advising on narrowing the scope of the language, such that only pure terrorism would be excluded and not Ancillary coverage, which were anticipated and have not been covered under the basic perils for years.

We are continuing to monitor the changes in the Property arena.