Terror Insurance Bill Could Mean Lower Premiums for Jewish Groups

Jewish leaders are hoping terrorism insurance legislation, expected to become law within days, will provide relief from skyrocketing premiums Jewish organizations are paying to insure their offices.

The terrorism insurance bill, which passed the House of Representatives on Nov. 14 by a voice vote, provides insurance companies with up to $100 billion in government protection against losses from terrorist attacks. The Senate was expected to vote on the bill this week.

The federal protection should allow insurance companies to lower their rates and take on more clients, the bill’s proponents hope.

“It’s likely to reduce the chances that insurance companies will be skittish about offering insurance,” said Diana Aviv, vice president for public policy at United Jewish Communities. “We think it’s a partnership between the government and the insurance companies to meet their responsibility to provide insurance coverage to all businesses that require it, including terrorism coverage.”

But Aviv noted that the bill doesn’t give any guarantees that insurers will indeed lower their rates or offer terrorism insurance to their clients.

Since Sept. 11, Jewish groups have had a hard time obtaining terrorism insurance and have faced skyrocketing premiums for property and casualty policies.

Jewish groups are not the only ones facing this problem — the Insurance Information Institute estimates that rates have increased 30 percent nationwide since Sept. 11 — but the rate hikes have forced some federations and Jewish groups to choose between insurance and programming.

Trying to compensate for a $50 billion industry loss since the attacks, insurance companies are passing on costs to clients and cutting back on terrorism coverage.

“Commercial insurance rates have risen across the board, particularly in big cities and in locations considered higher risks than others,” said Jeanne Salvatore, vice president for consumer affairs at the Insurance Information Institute. Considered particularly risky are high-rise buildings, government buildings and high-profile venues such as arenas and stadiums.

President Bush is touting the insurance bill as a boost to the sluggish economy, but Jewish leaders believe it also can help their predicament.

Premiums in some cases have doubled, Jewish groups say.

For example, the UJA-Federation of New York’s general liability rates increased from $2.4 million to at least $4.8 million. Property insurance has risen from $870,000 to $1.7 million, according to John Ruskay, executive vice president of the federation.

In the long run, Jewish leaders say, the proposed legislation should help equalize the market, lowering rates for their properties.

“Everything is dependent on the assumption of no future terrorist attacks,” Aviv said. “The longer we go with sufficient efforts to make sure terrorist attacks do not happen, the bargaining position of organizations and the sense of responsibility of the insurance companies go up.”

If there is another terror attack, however, it could exacerbate insurance companies’ concerns, leading to further hikes in premiums.

The bill guarantees that the government will pay for 90 percent of losses caused by a terrorist attack after the first $10 billion.

In case of lesser damages, insurance companies would be responsible for less than 10 percent of their premiums, with the government handling the rest. The insurance companies’ share of the cost would rise over the three years of the legislation, to a maximum of 15 percent.

If the government pays for losses under $10 billion, it would add a surcharge of up to 3 percent to the premiums charged by the insurance companies.

The UJC has surveyed Jewish organizations but has found no evidence that they are being assessed especially high premiums, Aviv said.

“Jewish organizations are not being singled out by insurance companies,” she said. “It’s more about location and proximity of potential danger than targeting our community.”

For example, Jewish organizations located near prominent government buildings or skyscrapers might face higher premiums, regardless of the groups’ business

If the law is enacted, Jewish groups will have to see how it affects the community before planning the next steps, Aviv said.

“If we see that people can’t get insurance coverage, and that this guarantee does not make a difference, we will go back to the drawing board,” she said.

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