SECTION: NEWS; Pg. 15

LENGTH: 413 words

HEADLINE: Terrorism insurance cover crisis

BYLINE: By Real Estate Writer EMILY OSBORNE

BODY:
COMMERCIAL property owners are paying thousands of dollars extra in insurance premiums for cover against acts of terrorism specifically excluded from general insurance policies.

These added costs are expected to cause big rental increases when leases are renegotiated or new leases issued, a commercial property agent has warned.

State director of asset services for commercial property agents Knight Frank, Bruce Foreman, said insurance against terrorism - once part of general property insurance - had risen about $5 sq m.

This was on top of insurance premiums for commercial property rising from about $4 sq m to more than $7 sq m in 12 months. For a high-rise building in the central business district, such as the Santos tower, it meant about $150,000 extra a year.

"As a result of the September 11 terrorist attack (in the US) last year and the current crisis in the insurance industry, the cheapest cover against terrorism now starts at about $5 sq m," Mr Foreman said.

"At the same time, normal insurance premiums for commercial properties have risen by between 70 per cent and 90 per cent, or about $3.50 a square metre, while the excess payable by the policyholder has generally been increased 10-fold to contain the premium increases.

"For an average-sized business leasing about 500 sq m, just covering the increased premiums will cost more than $4000 a year.

"This will be a significant impost."

The Insurance Council of Australia is continuing its push for the Federal Government to set up a national insurance pool that would be drawn on by general insurers when hit by claims for financial damage wrought by terrorism.

From January 1, global reinsurance providers stopped covering acts of terror, leaving Australia's general insurers fully exposed to big payouts in a major attack.

The council has proposed the setting up of a special pool that would fund a new levy on all Australian insurance policies to build reserves of at least $1 billion.

Mr Foreman said public liability cover for some shopping centres was also proving extremely hard to obtain or, when found, was very expensive.

"Most building owners find it difficult to see why insurance costs should have risen so significantly," he said.

"The general feeling is that Australians are being punished for something that happened elsewhere in the world and insurance companies seem to have taken the opportunity to push prices up."

LOAD-DATE: August 11, 2002