Demand for insurance against terrorism has risen slightly and prices for such coverage are "relatively flat," says a new survey by Marsh Inc., a major insurance broker.

In a Marketwatch Update released Aug. 25, New York City-based Marsh says that 46.2% of the companies and public-sector entities surveyed bought terrorism coverage in the second quarter of this year, up from 44.2% in the first quarter. But that purchase, or "take-up," rate is substantially higher than the 23.5% reported for the second quarter of 2003.

Stephen Lundin, Marsh senior vice president, says, "Until now, the increase in take-up rates was likely due to the softening property insurance market which enabled firms to use any savings in costs to obtain protection against potential terrorism risks. However, terrorism events outside the United States in recent months may have also contributed to an increased focus among businesses on these exposures."


The second-quarter price of terrorism coverage declined marginally, to 0.0076% of total insured values from 0.0080% in the first quarter, the survey adds. The rate for construction companies tripled, to 0.0303% of total insured values, in the second quarter, but Marsh says that jump "is likely due to quarterly volatility in the findings, and is not necessarily indicative of the overall market for construction."

The report is based on responses from 807 companies and government bodies that renewed property insurance policies from April through June.

Insurance, real estate and construction groups are lobbying Congress to extend a 2002 law that provides federal backup coverage for terrorism-related claims that exceed certain thresholds. The statute, the Terrorism Risk Insurance Act, doesn't expire until Dec. 31, 2005, but industry officials are pushing for Congress to extend it early. They argue that the move would provide stability to the insurance market.

Bills have been introduced in the House and Senate to continue the terrorism insurance law for two or three years, but no measure has cleared committee yet. Moreover, the congressional schedule is tight: lawmakers are expected to be in session only until early October, so they can campaign full-time as the Nov. 2 elections draw near.