With the lack of sufficient terrorism insurance coverage for single-asset CMBS deals becoming a major issue in the past few weeks (see story p. 1), rating agencies are starting to develop their own frameworks for looking at this particular risk.

Fitch Ratings will be coming out with a framework in about two weeks that would look at the level of risk for collateral in single-asset-type transactions, trying to determine how a terrorist act would affect the ratings on bonds associated with these assets.

"We will look at the risk of that asset to see if it's a low risk, a medium risk, or a high risk," said Susan Merrick, managing director at Fitch. "If it's a low risk, there will likely be no rating action taken. But if it were a high risk, there is a greater likelihood that there would be some rating action taken."

To determine the level of risk - low, medium, or high - on the assets, Fitch will be looking at different factors such as: the property's location - whether or not it is a suburban location, for instance - the size or the height of the property, whether or not it has a very high-profile tenant, if it is a trophy asset, if it is a symbol of America, or if it is very close to a major transportation network, etc.

The rating agency will also be looking at the kind of insurance specified in the mortgage loan documents. Fitch has been working with the servicers who have defined standards under which they operate. Part of their duties include tracking the insurance the borrowers have and tracking any changes upon renewal.

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