Association Says N.Y.C Facing "Perfect Storm"

By Mark E. Ruquet

NU Online News Service, March 4, 11:50 a.m.EST? Two miles from the World Trade Center destruction,businesses are finding it impossible to get insurance and the Sept.11 reverberations are being felt throughout New York, creating apolicyholder's nightmare, an agents group official said.

T.J. Derella, first vice president for the ProfessionalInsurance Agents of New York, in an interview with the NationalUnderwriter said that businesses below 14th Street inManhattan are finding it nearly impossible to find insurance acrossall lines.

Mr. Derella, the president of The Kingstar, a wholesale agencyin Kingston, N.Y., said he based his comments on the feedback fromthe more than 350 retail agents he deals with throughout thestate.

He made his comments in follow-up to testimony given to the NewYork State Insurance Department. Mr. Derella said the factorsbehind the hardening insurance market, coupled with the fall-outfrom the terrorist attack of 9/11, have created a " ?perfect storm'scenario, with the rapid deterioration of market conditions,"throughout the state.

The testimony came last week at a hearing held by the departmenton the condition of the state's insurance market.

Mr. Derella told department officials that "availability andaffordability do not impact equally all businesses or all areas ofthe state," and "some industries are more adversely impacted thanothers." He added that agents with multistate accounts tell himthat the market conditions are worse in New York thanelsewhere.

"Insurers throughout the state are actively re-underwritingtheir exposure," Mr. Derella said. "However, reports from ourmembers indicate that availability problems are most severe in NewYork City."

While much focus is being placed on large commercial propertyrisks, small commercial accounts are finding it difficult andsometimes impossible to find coverage.

Many insurance companies are leaving lines of business, or ifthey are writing, are writing as non-admitted, dramaticallyescalating rates and putting terrorism exclusions into thepolicies, he said. Carriers are not writing large property risk orexcess property directly. Coverage of $50 to $100 million inliability is not being written without terrorism exclusions onnon-admitted paper, he added.

Statewide, Mr. Derella pointed out problems that have plaguedNew York in the past, particularly concerning coverage forcommercial contractor liability, have become even more acute. Wherecoverage is available, rates have risen between 30 and 1,000percent, he said.

He pointed to one contractor who last year paid $8,000 forinsurance and the same coverage this year cost $33,000. He saidreforms of regulation over contractor liability are urgentlyneeded.

The state's market situation underscores the need for a federalbackstop for reinsurance related to terrorism, said Mr. Derella,whose comments were echoed by the Independent Insurance Agents ofNew York of Syracuse, who gave testimony on a related subject tothe department back in December.

To be free of rate and form oversight, insurers have gone to themore expensive non-admitted paper. Once the issue of reinsurance istaken out of the mix, Mr. Derella suggested, insurers could thenconcentrate on hard market issues, making price increases moremanageable.