N.Y. Comptroller: Insurers Not Helping After 9/11

Insurers, Mr. Thompson said, "are not helping the city right now, and this is undermining our ability to retain and attract new business. Once again, New Yorkers are being penalized."

While his findings were not greeted as surprising, both the head of the state's insurance department and a non-profit property-casualty group said his industry criticism went too far and was generally unmerited.

Mr. Thompson's office found that for so-called trophy buildings looked on as terrorist targets, on large-sized accounts with premiums of $1 million there was an average 73.3 percent increase per policy, while medium-sized accounts between $50,000 and $1 million saw a 49.5 percent increase. Small-sized accounts paying premiums of less than $50,000 averaged a 39 percent increase.

Mr. Thompson's office made its findings after sending out 1,700 questionnaires to names supplied by agent/broker groups and receiving 152 responses. The report said that in many cases the responses constituted the answer for multiple agents and brokers working for one company.

The report found that after Sept. 11, 2001, respondents reporting commercial property coverage as being either "readily available" or "somewhat available" fell from 91.7 percent to 29.9 percent.

Scarcity was also reported in business interruption insurance, declining from 93.9 percent to 43.5 percent rating it as readily available.

The report said that owners of one trophy building told the comptroller's staff that its property insurance premium increased almost 700 percent without terrorism coverage for one-third of the property's value.

It related that the owner said he could only get terrorism coverage for 10 percent of the previous limits, and that the rate for this reduced terrorism coverage "was so high he would not even discuss it."

The report said another owner approached 25 insurers in domestic and foreign markets and none would insure his property portfolio at any price.

Mr. Thompson said he is backing a federal measure to provide government-supported terrorism insurance.

His announcement noted that many states have encouraged creation of new insurance companies to provide workers' compensation and medical malpractice insurance, and suggested that New York should consider such action for the state's commercial insurance market.

New York City government, he said, should make physical improvements and increase coverage by security personnel to reduce exposures and make local businesses a more attractive risk.

Besides companies making use of captive insurers, he suggested purchasing groups, reciprocals and other self-insurance arrangements, which he said should have the backing of the state insurance department.

New York Insurance Superintendent Gregory V. Serio said Mr. Thompson's recommendations were "echoing almost point by point" items he had mentioned in a forum held by New York Assembly Speaker Sheldon Silver, D-Manhattan. He called them "helpful to the cause."

However, Mr. Serio said the criticism of the industry "may be a bit of an overstatement. We have had individual situations we've had to address, but I'm not sure I'd make that a blanket statement. A lot of carriers have stayed in the market, and one company renewed 90 percent of their business in lower Manhattan."

Mr. Serio said he understood Mr. Thompson's sentiments, but he felt one could not generalize because it was difficult to determine whether insurers were acting out of legitimate concerns or whether they were "gaming."

He said he is working with companies that have retrenched from the city.

Bernard Bourdeau, president of the New York Insurance Association in Albany, N.Y., a non-profit group of property insurers, said, "there's not much news here." Increases were underway before Sept. 11, 2001, and "it's the nature of risk."

"To say insurers are colluding to pick on New York City is a bit of exaggeration. High-rise buildings in any city have the same risk profile," he added.

Mr. Bourdeau said that "while there have been some dislocations and higher prices, for the most part the private sector has been working this thing through." Building owners seeking coverage "need to go to multiple places," he suggested.