By David E. Simon

The Terrorism Risk Insurance Act (TRIA) has been a tremendous success since its inception in November 2002. In a changing and uncertain world, it has provided real estate owners, including REITs and their financial partners, one of the tools needed to finance, acquire, sell and develop real estate nationwide.

TRIA requires insurers to make terrorism coverage available to commercial policyholders on the same terms and conditions as other offered insurance. In return, TRIA provides reinsurance above certain levels to the insurers who make available coverage against foreign acts of terrorism.

As a result of TRIA, the availability of terrorism insurance increased significantly and take-up rates rose with it. According to a recent industry survey, the take-up rate for firms with a total insured value (TIV) of between $100 million and $500 million was 52 percent as of June 2004. The take-up rate for firms with a TIV of between $500 million and $1 billion was 68 percent.

These take-up rates compare favorably to, and in some cases exceed, the take-up rates for far-older government-backed insurance programs dealing with specific perils such as the California Earthquake Insurance Program and the National Flood Insurance Program.

TRIA is currently set to expire on Dec. 31, 2005, creating a great deal of uncertainty in the insurance marketplace. Policy renewals taking place during the first few months of 2005 must address an early 2006 landscape without TRIA, and we can only expect this confusion to increase as numerous policies expire on April 1 and July 1.

What would an environment sans TRIA look like? Not very appetizing. Risk management professionals indicate that there is little evidence that a sustainable, private marketplace for terrorism insurance would exist in the event TRIA expires. No viable alternatives have been identified that would avoid market disruption.

Our industry is far from powerless in its efforts to work with Congress to extend TRIA, and there are two important ways you can help. First, make sure that your company's risk manager has completed and returned the U.S. Treasury Department's TRIA survey.

Second, support the NAREIT-led Coalition to Insure Against Terrorism in its legislative efforts and contact your members of Congress. Tell them that TRIA helps support the economy and jobs. Tell them that allowing TRIA to expire will leave policyholders with very difficult choices—no coverage or, if available, a deficient product at significantly higher cost. Tell them that if a terrorist attack occurs without TRIA in place, uninsured businesses will face the risk of ruin and the federal government will be under pressure to quickly assemble a financial assistance package for underinsured victims.

Looking beyond our borders, NAREIT continues to promote the dividends and diversification benefits of U.S. REITs with investors around the world.

In early March, we teamed up with Cohen & Steers during MIPIM (a leading international forum and marketplace) in Cannes, France, to host a luncheon bringing U.S. REITs and foreign investors together.

I'm also pleased to note that FTSE Group, the global index provider, has taken over calculation of what has been renamed the FTSE EPRA/NAREIT Global Real Estate Index Series. With over $385 billion in assets under management in real estate portfolios globally, there is a worldwide demand for a cutting-edge index to help investors track the industry's growth and performance.

David Simon
NAREIT CHAIR
CEO, SIMON PROPERTY GROUP