Pure Premium Insurance Costs, 9/11, TRIA and You

In 2001, the Amalgamated Houses co-op in the Bronx paid $287,000 in insurance premiums. The following June, when the existing policy terminated, the yearly tab rose to a staggering $427,000—an increase of almost 50 percent. And wasn’t just the Amalgamated Houses whose insurance costs skyrocketed. All across the city, in buildings both commercial and residential, premiums rose markedly.

“2002,” recalls James A. Fenniman, executive vice president of MLW/ Bollinger NY, one of the city’s larger insurers, “was a problem.”

Wherefore the uptick in premiums? Obviously, the events of September 11, 2001, had a profound impact on the insurance industry. The reluctance of insurers to underwrite buildings perceived as potential terrorist targets explains some of the sharp increases, but as terrorist targets go, the Amalgamated Houses are not exactly Rockefeller Center.

By last year, pricing had come back down; in 2006, the costs in New York, if not the rest of the country, have flattened out. How much of a factor was 9/11 on insurance rates in the city? Did the industry use 9/11 as an excuse to raise prices, or was such an increase inevitable? What can co-op and condo associations do to reduce their insurance costs? And, most importantly, is the recent price stabilization here to stay—or is it the calm before the storm?

The Industry

To understand why prices rose so sharply, why they fell, and why they may increase again, we must first understand a little about the insurance industry.

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