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Aon Agrees With Fitch Report Predicting CMBS Disruption if TRIA Expires
Commercial Real Estate Benefits if TRIA Extended
PRNewswire-FirstCall
CHICAGO

A recent report by Fitch Ratings suggesting a benefit to the U.S. commercial real estate market if Congress extends the U.S. Terrorism Risk Insurance Act (TRIA) for two more years when it expires on Dec. 31, 2005, is "right on point," according to an Aon expert.

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"Aon completely agrees with Fitch's analysis of the potential impact on the real estate loan origination and servicing market if TRIA expires," said Aaron Davis, a vice president in National Property Syndication. "In fact, the issue could be more serious than it was immediately after 9/11 as many pre- 9/11 loan agreements did not specify the need for terrorism coverage."

The Fitch report predicted that a potential TRIA expiration would also adversely affect commercial mortgage-backed securities (CMBS) servicers, who currently enforce the inclusion of terrorism coverage on the loans they service. Because of changes in mortgage loan documents, the servicers may have a more difficult time demanding terrorism coverage if TRIA is not extended.

Davis said that currently, most of the new loans include specific language about terrorism insurance requirements. "Many of these commercial loans allow the borrower to stop buying terrorism coverage if the costs are more than two times their 'all-risk' property pricing," Davis says. If premiums for terrorism coverage go up, the Fitch report stated that servicers may no longer be able to rely on the language of the loan documents to enforce the terrorism insurance requirements, and this may result in an unnecessary disruption to the CMBS market.

Aon Corporation (NYSE: AOC) ( http://www.aon.com/ ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

  Contact:
  Al Orendorff
  312-381-3153

This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of regulatory investigations brought by state attorneys general and state insurance regulators related to our compensation arrangements with underwriters and related issues, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, is contained in the Company's filings with the Securities and Exchange Commission.

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SOURCE: Aon Corporation

CONTACT: Al Orendorff of Aon Corporation, +1-312-381-3153

Web site: http://www.aon.com/

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