Real estate transactions worth over $10.5 billion have been impeded by the ongoing lack of terrorism insurance coverage — jeopardizing thousands of jobs in construction, retail, tourism and other sectors, according to a survey conducted by Washington, D.C.-based The Real Estate Roundtable.
Survey respondents — including owners, developers and lenders — reported project delays and cancellations in 13 states, including New York, California, Georgia and Hawaii.
The survey also confirms that the office sector has been most affected by the lack of terrorism insurance, outpacing delays and cancellations in the apartment and retail sectors by a 3-to-1 ratio. "Given the huge economic cost of delayed or cancelled real estate projects — for our industry, for the hundreds of thousands of workers whose jobs are on the line, for local communities that may lose out on millions of dollars in tax revenue — the need for a federal backstop on terrorism insurance coverage is more important than ever," said Real Estate Roundtable Chairman Nelson C. Rising, chairman and CEO of San Francisco-based Catellus Development Corp.
A House-Senate conference committee has been named to negotiate a compromise between the two versions of terrorism insurance legislation. Such legislation has strong support from President George Bush, who on Labor Day restated his warning that inaction is costing the nation billions of dollars in stalled or cancelled real estate projects and idling thousands of construction workers.
"There’s been over $8 billion worth of projects that have been delayed because they can’t get insurance," President Bush stated. "That means 300,000 workers aren't working. If we want to do something to make sure the job base continues, Congress needs to get moving on a terrorism insurance bill."
Of the survey respondents who reported being able to obtain terrorism coverage, a substantial majority stated that their policies excluded damages arising from chemical, biological or radiological acts of terrorism and contained cancellation clauses of 60 days or less. Over 42% of the overall insurance premiums paid by survey respondents are now attributable to terrorism coverage. Before Sept. 11, policies included such coverage at no extra charge.
Without adequate coverage, many lenders are unable to provide financing for the construction, acquisition or refinancing of projects. The lack of terrorism insurance could also lead to a decline in property values and jeopardize real estate investments made by thousands of individual investors and pensioners across the country.