| The hotel industry is fortunate. The federal | | | | hotels can expect any terrorism coverage coming |
| government's terrorism insurance backstop has been | | | | out of the insurance markets to increase in price. As |
| in place since 2002 with no disruption in coverage. In | | | | well they should - the TRIA coverage includes |
| fact, in 2007, Congress approved the Terrorism Risk | | | | terrorism coverage for all businesses, which allows |
| Insurance Act (TRIA), which extends the coverage | | | | the premiums to remain low. Insurers may also |
| through 2014. However, the language in both acts | | | | offer terrorism coverage with limitations and |
| has made it clear - federally backed terrorism | | | | exclusions. |
| insurance is only temporary. | | | | Currently, TRIA includes these parameters: |
| That's because the government does not want to | | | | - A $100 billion cap on claims. |
| assume the role of insurer, and insurers would agree. | | | | - A requirement that the US Treasury distribute |
| Yet the much-needed coverage does provide | | | | regulations to determine pro-rata shares of insured |
| coverage that lenders require. Should it become | | | | losses when insured losses exceed $100 billion. |
| privatized once more, the costs could become | | | | - A directive to the Comptroller General to determine |
| prohibitive. | | | | which areas of the country have capacity constraints |
| Hotels that have such coverage aren't talking. But | | | | - higher concentrations of risk |
| experts suggest that anywhere from 50 to 60 | | | | The current administration has proposed a reduction |
| percent of hoteliers carry terrorism insurance on their | | | | in its commitment to TRIA, which could send |
| hotels and properties under development. At the | | | | terrorism insurance into the private market sooner |
| moment, the cost of a hotel terrorism insurance | | | | than expected. When TRIA was established, it was |
| policy ranges from 2 to 10 percent of the overall | | | | made clear the program was temporary until the |
| hotel property insurance premium. | | | | insurance market could build adequate reserves to |
| The good news is that terrorism insurance rates are | | | | cover such losses. While Congress is expected to |
| dropping. Last year, hotels could expect to pay 7.7 | | | | pass another extension to the plan, hoteliers need to |
| percent of premium. This year, 7.1 percent, according | | | | consider their exposure and what future costs might |
| to the Insurance Information Institute. | | | | be. |
| The bad news? If Congress doesn't extend TRIA, | | | | |