Think about all of the factors that are taken into account when the costs of any property insurance premiums are considered. Of course, the main worry of any insurance provider is the amount of risk they are undertaking when it comes to granting a policy; the more risky the policy is, the more costly the policy is going to be. This is the way the insurance industry operates and it has been this way for some time now.
Ever since the attacks on the World Trade Center on September 11, 2001 the cost of commercial property insurance has begun to scale upward. Other world events have not made this situation any better, including Hurricane Rita and the even more devastating Hurricane Katrina. It seems that commercial property insurance is not nearly as solid of an investment factor as it has been in the past. This is reflected in the ever-increasing insurance premium, which creates a problem in the industry. After all, having commercial property insurance is necessary, no matter what the cost. Commercial property loans are never granted without the property insurance coverage and this has created a bit of a dilemma in the economy.
However, the fact that commercial property insurance has continued to rise has made it rather difficult on the business world, as policies are being up-charged, changed, canceled, and modified beyond the needs of the average insured.
About the Terrorism Risk Insurance Extension Act:
Also known as TRIEA, the Terrorism Risk Insurance Extension Act has provided a sort of gap insurance coverage for property owners who found it necessary to obtain insurance against acts of terror on their properties. This is important, as many insurance companies find it difficult to provide insurance for such a high-risk peril, and it is important for both mortgage and loan companies and property owners to be insured against all possible acts or perils.
At the end of 2007, a vital change will be taking place; the Terrorism Risk Insurance Extension Act will expire, changing the face of the post-911 insurance industry forever. It was put in place because there was a new niche for insurance that could not be covered, that of the risk of terrorism. For this reason, Congress is re-evaluating legislation regarding insurance, including the validity and necessity of the Terrorism Risk Insurance Act.
Having a federal terrorism insurance policy in place is important because without it, private commercial property insurance is hardly affordable, creating an economic dilemma. In certain areas of the United States, the possibility of affording adequate commercial property insurance coverage would be drastically reduced, thereby creating problems in the business world and possibly leading to a severe economic slow-down.
Anybody remotely involved in the real estate industry should understand what a vital role property insurance plays in the real estate market. In the same sense, having a healthy real estate market is vital to having a healthy economy.
There is virtually none without the other, and for this reason real estate agencies and the CCIM are urging legislators to make a federal program available of some kind, many of them hoping to keep the Terrorism Risk Insurance Extension Act in place to cover damages to property that result from any acts of terrorism or any damage resulting from foreign attacks or other acts of war.
As of right now, the future of the Terrorism Risk Insurance Extension Act is at stake. Active members of the real estate community are going to be forced to act now, or risk having the federal catastrophic insurance plan revoked, causing definite problems both now and in the immediate future.
It is up to Congress and the Bush Administration to decide whether or not TRIEA will be re-enacted, and that will determine the future of the health of the real estate market in the United States. It is the hope of many that legislators will be able to see the importance of such federal insurance plans in the real estate industry, and the importance in the overall United States economy.