“Its confusing. There is so much variance from company to company and from line to line as to how terrorism risks are charged,” commented Donald Beery, vice president at EUSTIS Insurance & Benefits, the largest independent agency in New Orleans.

“With such inconsistencies, its difficult for us to manage terrorism risks for our clients,” said Mr. Beery, adding that some insurance companies may now be wishing they hadnt pushed so hard for TRIA.

“Now they have to provide terrorism coverage and some of them dont know what to do with it.”

Mr. Beerys firm is among a growing number of agencies taking on the added role of risk management for their clients.

In the current economy, as many clients make cutbacks, including their risk management staff, some have begun to depend heavily on their agents as risk mangers, said Mark Russ, senior vice president of commercial division at Arthur J. Gallagher & Co. in Itasca, Ill.

“Many clients are farming out their risk management at this point,” noted Mr. Russ. “They are leaning heavily on agents. Insureds are looking to agencies to bring to the table various ways to obtain limits that are required in these difficult times.”

“At this point, clients are saying, We dont have the manpower to provide risk management and we are leaning towards brokers and agents to help fill that gap,” he added.

But when it comes to managing terror risks, agents and brokers still face numerous challenges. Mr. Beery noted that his firm, which is involved in placing many waterfront properties that are considered potential terrorist targets, is finding it difficult to communicate the insurers inconsistencies to its clients.

“When we manage risks for our clients, its difficult a lot of times because of these inconsistencies,” Mr. Beery complained. “Clients say what they have read and understood from the passage of TRIA differs dramatically from what coverage is available from carriers.”

“This is a new and emerging peril where no one can anticipate whats going to happen,” said Maura Clancy, president of Clancy and Clancy Brokerage in Garden City, N.Y.

“The peril of terrorism is still so unknown in the United States,” said Ms. Clancy, who is also board chair at the New York chapter of Alexandria, Va.-based Independent Insurance Agents & Brokers of America.

“Thats the challenge in managing terrorism risk. Before 9/11, who would have thought that $20 worth of box cutters could kill so many people?”

However, there are some basic points of advice that can go a long way in helping clients counter terror risks, Ms. Clancy noted.

“One is, we say to our clients, You dont want concentrated risks the way you had before,” she explained. “You dont want all your facilities and employees in a single building,” she said.

“By spreading your facilities, your business can continue and be able to move on after a catastrophic event.”

She explained that primary sources for getting risk management and terrorism-risk-related information are partner carriers offering risk management guides, seminars and online assistance, as well as associations such as the IIABA and the New York City-based Insurance Information Institute.

Ms. Clancy also offered a critical view of TRIA, saying that while it is helping to stabilize the market, “it has not really impacted us in terms of pricing and availability. The pricing is still very high for our particular clients.”

But Gary Marchitello, managing director of national property practice at Aon Corporation in Chicago, Ill., offered a kinder view of TRIA.

“With respect to inconsistencies among carriers, that has ameliorated greatly after TRIA,” he said. “It takes a while for any market to sort itself out, and it has now become easier for brokers and agents to find the medium among insurers. The pricing has also moderated greatly, and we are seeing more clients buying the coverage than before.”

Mr. Marchitello acknowledged that there is an evolution that is turning more clients to their brokers and agents for risk management advice and services. But, Mr. Marchitello argued, this has been more of an ongoing, long-term trend rather than just a side effect of a soured economy.

“This is an evolutionary change we have been seeing for the past decade,” he said.

When it comes to managing terror risks, while the vast majority of large corporations among Aons clients have their risk management staff intact, “when they feel the need for more particular expertise, they come to us for help,” Mr. Marchitello noted.

Some clients may seek Aons advice on how better to protect their facilities and seek assistance in understanding how to manage potential crisis situations. In addition, they look to the firm in identifying and quantifying where their greatest terror risks might be, he noted.

The firm has also formed a partnership with Giuliani Partners, a consulting firm founded by the former New York Mayor Rudolph Giuliani (see NU, Jan. 6, 2003, page 10).

“Many large brokers have deep risk-management departments, and we have a very-deeply-staffed risk practice and business continuity and contingency practice,” Mr. Marchitello said. “We have people who do nothing but look at terrorism risks all day.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 30, 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.