More than 200 real estate transactions totaling $11.5 billion have been canceled or slowed down because of the lack of terrorism insurance, according to a survey done by the Real Estate Roundtable. The results, released Sept. 4, indicate that transactions hampered by the insurance problem were in 12 states plus the District of Columbia. The locations include New York, New Jersey, Illinois and California, but also Florida, Georgia, Hawaii, Michigan, Ohio, Pennsylvania, Texas and Virginia.
Twenty-one of 28 respondents said they had obtained terrorism insurance in 2002, but more than two-thirds said their insurance didn't cover losses from chemical, biological or radiological acts. About half said their insurance had a cancellation clause of 60 days or less. An average of 40% of the respondents' premiums paid goes for terrorism coverage, the survey said.
Project financing was the type of transaction cited most frequently, followed by building acquisition. Office projects were most affected, followed by apartments, industrial and hotel projects. Respondents said that delayed or terminated transactions affect 1,520 jobs.
Nine respondents said the lack of terrorism insurance, or its affordability, has hurt their business severely. Sixteen said they were somewhat affected. Five said it hasn't had an impact on them at all.
Two-thirds of the roughly 30 respondents to the August survey from the Washington, D.C.-based organization are owners or developers.
The survey's release comes as a House and Senate conferees are set to begin working out differences between their bills to provide a federal "backstop" for catastrophic claims related to future terrorism attacks. Conferees were appointed shortly before the start of the August recess. Congressional aides say the lawmakers have not met yet, although staff discussions have taken place.
Real Estate Roundtable Chairman and CEO Nelson C. Rising says, "Our findings confirm that the lack of adequate terrosism insurance coverage is worsening in terms of the dollar impact on the economy as well as its geographic scope." Rising also is chairman and CEO of Catellus Development Corp., San Francisco.
The Mortgage Bankers Association said in July that about $3.7 billion in commercial real estate deals had been cancelled to that point this year, and another $4.5 billion delayed or altered.