Hartford's small and mid-size clients (generally those under $100 million in property values) did not have to make a decision about terrorism cover, as it was provided to them at no charge, Ms. Michener said.

St. Paul Cos. also indicated that about 10 to 15 percent of their large clients had purchased the terrorism cover. Patrick Hirigoyen, senior manager of corporate communications for the St. Paul, Minn.-based insurer, noted that many clients are still within the window period of the time provided to respond to the offer, so that figure may rise.

“After 9/11, terrorism was excluded for approximately 5,000 of our policyholders,” Mr. Hirigoyen said. “They were the first group that we notified under the law [TRIA] and offered terrorism coverage tothese are the ones that still have time to respond. For everyone for which we did not exclude it, we are offering the coverage at renewal, and that happens all throughout the year.”

Mr. Hirigoyen added that it is mainly “large operations” that have purchased terrorism coverage. He did not have data on whether clients in any particular part of the country were more likely to be buyers.

Geography seems to be a key factor in the terrorism coverage buying decision. Preston Moss, a broker with Blanchard and Calhoun in Augusta, Ga., got right to the point: “In this region we just don't see ourselves at risk. There is no demand for it [terrorism coverage]. If we were in Los Angeles, Chicago or New York, there would be more buyers.”

Mr. Moss added that the insurers he places business with are generally giving the coverage at no cost to “Main Street risks.” One of Blanchard and Calhoun's larger clients, the Augusta Regional Airport, rejected terrorism cover after receiving a quote of $165,356. “Weighing the risk versus the cost, I could not recommend that they spend that money,” Mr. Moss admitted.

Unlike Augusta Regional, the Dallas-Fort Worth Airport did see a terrorism exposure worth insuring. Norma Carabajal Essary, the airport's risk manager, obtained terrorism coverage for a premium of $156,540 from Johnston, R.I.-based FM Global Insurance Company. D-FW Airport purchased $500 million in coverage for acts by foreign terrorists and $100 million for acts of domestic terrorists, Ms. Essary noted.

The year before, D-FW Airport received a quote of $2.5 million for $100 million in coverage, so Ms. Essary is happy with her current premium. “We are an HPR (highly protected risk) facility with superior security and operations spread over a wide area,” Ms. Essary explained when asked about the relatively low premium she negotiated.

To put that $2.5 million quote in perspective, it is about equal to the airport's renewal premium for its entire property insurance program.

“A prudent risk manager or broker must assess the size of the entity, its ability to withstand catastrophic loss, and the number of patrons it serves in deciding whether terrorism coverage makes sense,” Ms. Essary added.

Airports appear to be among the most serious shoppersalthough not necessarily buyersas respects terrorism coverage.

A survey conducted by the D-FW Airport found that the major airports serving Boston, Los Angeles and Chicago have purchased terrorism insurance. Major airports serving Atlanta, Denver and Houston rejected the coverage, according to the survey.

Mike Natale, risk manager for the Metropolitan Washington Airport Authority, said that he purchased terrorism coverage after it was offered as part of the insurer's TRIA obligation. The Authority operates two major D.C.-area airports, Reagan Washington National and Dulles International.

The Port Authority of New York and New Jersey, which operates the three major New York City-area airports, did not return telephone calls requesting information on terrorism insurance. The World Trade Center, destroyed in the 9/11 terrorist attacks, was owned and managed by the Port Authority.

Wayne Salen, director of risk management for Niagara County (N.Y.), concluded that terrorism coverage was worth the additional premium due to a nearby airbase and the extensive public recreational facilities connected to Niagara Falls.

Mr. Salen negotiated a $20,000 premium for the coverage after the county's insurer, Hartford, Conn.-based Travelers Property Casualty Corp., had originally quoted about $60,000.

“We thought we would have to place terrorism coverage in the excess and surplus market, but TRIA came along and Travelers had to offer it,” Mr. Salen explained.

He added that he wanted the coverage to be on admitted paper, so TRIA was beneficial in that regard. Mr. Salen noted that the county had been insured by Travelers for many years. That good relationship was instrumental in holding down the terrorism premium.

But the fact remains that the vast majority of organizations have snubbed terrorism coverage. “Most companies just don't feel exposed,” said Gail Norstrom, managing director in the New York City office of Aon Risk Services. “They can't quantify the exposure, can't use risk management tools or modeling.”

The way in which insurers are offering the coverage is also partly to blame, Mr. Norstrom said. “The roll-out process has been chaotic. Insureds got three-page memos from their carriers. Most decided to wait until renewal.”

Mr. Norstrom indicated that pricing also became an issue.

“There was such diversity of pricing. With multiple carriers on most programs, you could have rates from 25 cents to $10″ per $100 of property insurance coverage, he said. “The clients were wondering if the carriers knew what they were doing,” he said, adding that “some [carriers] quoted terrorism premiums equal to 25 to 50 percent of the entire property insurance premium.”

Mr. Norstrom also noted that the 15 percent “hit ratio” figure cited by some insurers for this coverage sounded “on the high side.”

A recent survey of insurance agents conducted by the Washington, D.C.-based Council of Insurance Agents and Brokers found that 60 percent of the agents responding said that less than one in 10 small commercial clients had purchased terrorism coverage.

For medium size accounts, that figure rose to one in five. About half (48 percent) of the large accounts purchased it.

As for the cost of terrorism coverage, the most cited cost was about 10 percent of the property premium, but that went up to close to 20 percent for larger accounts, according to the survey.

Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.