Maurice Greenberg, chairman and CEO of AIG, discussing his company's second quarter 2002 results, noted that property casualty premiums were already on the rise before Sept. 11, 2001, but the events of that day dramatically strengthened the upward curve.

While Greenberg alluded to property/casualty rates across the board, two markets that have arguably been hardest hit by price increases and difficulties with availability are the workers' compensation and commercial property lines. The cost of insuring commercial properties and providing coverage for the nation's workers has surged. To be sure, other factors-plummeting interest rates and a tumbling stock market combined with years of aggressive underwriting and under pricing that slammed insurers' bottom lines- can also be blamed for the market difficulties of the past year. But there's no doubt that 9/11 has taken its toll, as many- though not all-of the problems related to those lines have been exacerbated by market tightening actions of reinsurers as a result of their Sept. 11 related losses and the difficulties in obtaining terrorism insurance.

Reports from across the country tell of increases of 25 to 100 percent and more for commercial property insurance- with anecdotal references to properties that have experienced increases in the 1,000 percent range. High profile sites and properties in which large numbers of people can be expected to congregate-such as national monuments-official or not, high-rise office towers, and major sports arenas are especially vulnerable to severe rate increases. In addition to higher rates, carriers are increasingly offering less coverage than they were providing pre-9/11.

Some Examples:

• California CPA reported that commercial property insurance rates in California have climbed a minimum of 25 per- cent this year and linked those rate hikes directly to 9/11. Higher rates are being seen in large urban areas with highly concentrated populations, like San Francisco and Los Angeles.
• According to the U.S. Treasury Department, terrorism insurance is unavailable for the Golden Gate Bridge. Premiums for the landmark's non-terrorism coverage rose from half a million dollars to $1.1 million while coverage limits dropped to $25 million from $125 million.
• Boston-area sports arenas and stadiums, such as FleetCenter, Fenway Park and Suffolk Downs, have faced significant increases in property insurance, according to the Boston Business Journal. The FleetCenter, where the Boston Celtics and the Boston Bruins play, was hit with a 40 percent premium increase for general liability and umbrella coverage, with no terrorism insurance included.
• Baylor University in Waco, Texas paid double the amount year for insurance this year than it did last. According to the U.S. Treasury Department, the higher premium $1 million compared to last year's $500,000- bought roughly half as much cover- age. The university's combined policies now provide $600,000 in coverage, while last year Baylor was able to secure $1 billion in combined coverage.

Current owners of existing commercial properties are not the only ones hurting. The lending community and buyers of commercial property have experienced their share of troubles too. The Mortgage Bankers Association reported that as of mid-year, nearly $8 billion in commercial property transactions were sacked or delayed because of insurance problems. Although higher rates have taken their toll, respondents to a survey of 25 commercial property survey largely blamed terrorism exclusions. Lenders are insisting on it and carriers are excluding it. The group is a proponent of a government-backed terrorism insurance bill and believes such legislation would go a long way towards stabilizing the lending environment for commercial properties.

Commenting on the survey results, Jim Murphy, MBA chairman stated: "The magnitude of these numbers astound me. We are looking at billions of dollars in commercial financing that has been killed in the first half of the year...The delay has been costly, and those costs will continue to go up the longer the delay" in Congressional passage of a terrorism insurance bill.

Like property insurance, workers' comp rates were rising before Sept. 11; and like the property insurance, workers' comp was greatly affected by 9/11. National Council of Compensation Insurance president and CEO Chapin Clark noted in a presentation in May 2002 to a group of some 500 insurance executives that the "state of the workers' compensation market remains difficult" and that preliminary results indicated 2001 was "one of the worst years in the market's history." Clark, who made the comments while introducing NCCI's report, "State of the Workers' Compensation Insurance Line," added, "The 2001 numbers tell a grim story, with some of the bad news tied to the September 11 attacks on America."

The NCCI report showed the workers' comp insurance industry had a combined ratio of 121 percent for the 2001 calendar year, a three-point increase over 2000's 118 percent. It marked the sixth straight year that combined ratios in the market have deteriorated.

While NCCI found that less than 2 percentage points, or around $500 million, of calendar year 2001 combined ratio on a net basis can be attributed Sept, 11-related claims, the group acknowledged that as continuing claims, such as those for respiratory and stress-related illnesses, are verified the impact of the terrorist attacks will evolve. It pointed out that majority of workers' comp losses from 9/11 have so far been ceded to reinsurance companies and will not show up in workers' comp net-of-reinsurance results.

In a Fitch Ratings report released August 6, Fitch concurred that the unexpected losses of Sept. 11 contributed to the lowered results in workers' comp lines, but asserted that the "key factor behind this poor performance continues to be that that workers' compensation pricing marketwide was inadequate from the late 1990s through 2001,"