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Managing Terrorism Risks Reduces Premiums

By Christopher M. Leporini, REALTOR® Magazine

Post 9/11, we live in an uncertain world. Among the terrorist attacks’ more tangible effects has been an across-the-board increase in commercial building insurance rates. Conning Corporation, which tracks insurance industry performance, reports that the average price of commercial insurance rose 18 percent in spring 2002, compared to only 10.3 percent in the spring of 2001. If you own commercial property, developing a terrorism risk management and reaction strategy is essential, not only to keep your tenants or employees safe, but to reduce your insurance rates as well. Insurers are more likely to give you a lower rate if you can demonstrate that you are prepared to respond should the unthinkable happen again.

Preparing for Terrorism: A Property Manager’s Guide (IREM Foundation, 2002; members $28, non-members, $40) can help you develop a plan to protect your staff, residents, and property against future attacks. An earlier book from the Institute of Real Estate Management, Before Disaster Strikes, showed how to develop emergency procedures for fires, earthquakes, and many other common risks. This companion piece focuses specifically on developing procedures for terrorist attacks, teaching you how to assess your exposure, understand the problems you may face, and respond to an attack.

The first half of the book focuses on responding to various types of attacks, including bomb threats and bombings, riots, biological weapons, and nuclear attacks, among others. Later chapters delve into developing building procedures; planning building recovery; and training staff, apartment residents, and commercial tenants to respond to attacks.

“Chapter 10: Building Security” recommends how to devise protective measures to make buildings safer. The book offers no one-size-fits-all security solution, but does suggest you consider factors such as aesthetics, building codes, cost, and operational constraints when planning security. The chapter also contains specific security tips for residents and commercial tenants.

Developing an emergency procedures plan that outlines how a property will respond to a crisis is a key step to protect staff, tenants, or residents, as well as the property itself. This should include an Emergency Management Team (or emergency response team) trained to react to disaster, take immediate action to assist occupants, and secure the property. Specific duties, such as conducting evaluations, coordinating with outside agencies, and providing first aid should be divided among members. Individuals should also be familiar with their teammates’ responsibilities, since injuries are likely to occur in a crisis situation, the book advises.

“Chapter 15: Creating the Emergency Procedure Manual” shows you how to create a manual to guide your team’s operations. According to the book, this manual should contain contact numbers for team members, management, building owner, and emergency assistance; floor plans and blueprints of the building, with mechanical shutoffs pinpointed; directions that instruct the emergency team on how to respond to different types of attacks; and instructions to educate for building occupants on emergency procedures and precautions.

Preparing for Terrorism also instructs readers on how to create a disaster recovery plan. According to the book, many companies have disaster recovery plans in place, however, few are prepared for weeks of disruptions, as occurred in the aftermaths of the World Trade Center Attacks. A recovery plan addresses three elements:

  • People—Ensure that personnel are trained to implement your recovery strategy to ensure property and business continuity
  • Property—Identify which elements of your building are likely to be damaged from specific types of incidents occur, which steps must be taken to repair or replace damaged elements, and what internal and external resources you will need for a recovery operation
  • Business Continuity—Devise contingency plans on how your tenants’ business will operate if the building is partially or wholly destroyed.

Just because you aren’t located next door to a trophy building doesn’t mean you’re immune from the fallout of terrorist activity, the book points out. For instance, many buildings located within several blocks of Ground Zero were damaged in the World Trade Center attack. So no matter where you live or what size and type of property you manage, devising a plan to deal with disaster before it happens just makes sense—both to protect your tenants and employees and to show insurers that you’re committed to safety. The importance of preparation is the one certainty in the post-9/11 world; Preparing for Terrorism arms you with knowledge you can use to minimize risks to your property.

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This post was contributed exclusively for REALTOR® Magazine.

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