Commercial Property Rates Jump 30 Percent After 9/11

Since four U.S. airliners crashed in a terrorist plot on Sept. 11, 2001, commercial insurance rates in Northwest Arkansas have jumped by about 30 percent.

The reason? We’re all paying for the billions of dollars in damage done by the terrorists in New York City, Washington, D.C., and rural Pennsylvania. Corporate scandals and a dip in the stock market have just made matters worse.

The rates aren’t just going up in New York City. They’re going up in Sulphur City and Siloam Springs, and across America as well.

Hight McNair, a sales representative for McNair & Associates, an independent insurance agency in Fayetteville, checked 50 commercial property accounts for us and said the average increase was about 30 percent.

“Some were more. Some were less,” he said.

McNair said he had one client who didn’t use his property last year and couldn’t understand why his insurance rates increased.

“Basically, everybody insures everybody,” McNair said.

Danny Norris of Springdale, a Nationwide Insurance representative, agreed with McNair’s estimate.

Norris said U.S. insurance companies had never imagined a terrorist attack of the magnitude of September 11, so that kind of possibility now has to be factored into insurance rates across the country.

“You take Nationwide Insurance,” Norris said. “Basically, we didn’t have any property insured in the World Trade Centers. But it’s not just what happened. It’s what could happen. There’s a whole new way of viewing the world of business.”

For property and casualty insurance companies, the devastation of September 11 had a bigger effect than the AIDS epidemic did on life insurance companies, Norris said.

Along with a 30 percent increase in commercial property, homeowners’ rates went up by an average of 25 to 30 percent in Northwest Arkansas, he said. One company raised their rates by 40 percent, and another has stopped writing homeowner policies for new customers for the time being. [See editorial Page 4]

Norris said litigation stemming from the September 11 terrorism could drag on for years.

“That’s got a tail that probably won’t end in our lifetime,” he said. “We’re living in some troubled times. So much devastation, so much catastrophe in such a short time.”

Ben Israel of Dixie Development Inc. of Springdale said he decided to raise the deductible that he pays on insurance for his buildings.

“I suggested a $50,000 deductible, and we’ll self-insure up to that point,” he said.

Israel said his company owns buildings totaling about 500,000 SF of space in Northwest Arkansas. If insurance rates have increased by 30 percent, that would raise Dixie’s cost of insurance by about $30,000 per year, he said.

“It’s not a fixed rate over a long term,” Israel said. “We’ll have to renew every year … It’s something they can alter anytime they want to as conditions change.”

Israel said he had been paying about 14 cents per square foot per year for insurance. He’s now looking at a rate of about 20 cents.

Downtown Manhattan has lost about 65,000 of its 368,000 jobs since the terrorist attacks of September 11. An estimated 80 percent of those jobs have relocated to other parts of New York City.

Guides who show tourists the emptiness of ground zero have an interesting way to explain the degree of devastation. Each of the two World Trade Center buildings took up a city block, and each one was more than 100 stories tall. That amounts to 200 city blocks of destruction, which is more than all the commercial space available in Atlanta.