Property Owners Struggle With Big Insurance Hikes When Denise Calvo recently saw the insurance bill for 55 Hudson Street, where she is co-op president, she thought the $44,000 in premiums had to be a mistake. The building had previously been paying $18,000 for the same property and liability policy. But a call to Cooper Square Realty, the management company for the 10-story, 35-unit building, quickly made it clear that there was no mistake. “They told me we were lucky, that other Downtown buildings were facing much greater increases,” Calvo recalled. “And when I said I wanted to shop around for another carrier, they warned me that if I didn’t pay this premium on time, the insurance company would cancel our policy and we probably wouldn’t be able to get another carrier.” Such tales are becoming increasingly familiar Downtown. In the wake of Sept. 11, co-op and condominium residents as well as large developers are facing steep premium and deductible hikes. Real estate insurance brokers report premiums being doubled, tripled, or even increased sixfold for the same coverage, though double-digit increases are more common. The problems don’t end there. Before Sept. 11, real estate policies usually covered terrorism. Now “carriers are trying to exclude terrorism any way they can,” said Bob Meder of Frank Crystal and Co., a broker in the financial district with numerous real estate clients, including 55 Hudson Street. State-regulated “admitted” carriers, whose claims are guaranteed by the state if they go bankrupt, are not allowed to exclude terrorism coverage. But insurance brokers say companies have ways to get around the rule. Some carriers use non-admitted affiliates, others limit terrorism coverage to a fraction of a building’s value, and others simply decline to cover certain buildings. Non-admitted carriers, meanwhile, are routinely excluding terrorism—or mold or flood damage—from policies, in part because of pressure from reinsurers, who share risk with primary carriers, experts say. But most banks are demanding comprehensive policies, with terrorism coverage, for mortgage financing. Perceiving higher risks, they are also requiring higher amounts of coverage, “It’s a triple whammy,” said Alan Rappaport, senior director and head of the real estate division at DeWitt Stern Group, an insurance brokerage that handles many Downtown buildings. “Insurance requirements are rising, premiums and deductibles are rising, and coverage is being taken away.” In the case of 55 Hudson, Calvo was also trying to consolidate and refinance the co-op’s two mortgages and the bank demanded insurance from an admitted carrier. But the building’s policy was with a “non-admitted” carrier, without terrorism coverage. More than a dozen admitted carriers refused to cover 55 Hudson, which is eight blocks from Ground Zero, before one said it would write a $5 million policy, half of what the bank required. After desperate pleading, Calvo said, the bank agreed to accept the $5 million, plus another $5 million in coverage from the original insurer. Many other property owners are also finding it difficult to buy the insurance they need. “There’s a big concern about the availability of adequate coverage,” said Gregory Serio, superintendent of the New York State Insurance Department. “Someone who had one million in coverage one year, is getting renewed for only half that amount. We’re facing an underinsured situation.” Serio was one of 25 witnessess who testified at a State Assembly hearing on insurance problems on Oct. 15. Some building owners are being forced to buy stand-alone terrorism insurance, which is very expensive and offered by few carriers. Ripple effects from the insurance problems can seriously hinder efforts to revitalize Downtown. “If building insurance premiums skyrocket, rents and maintenance payments will go up and it will wind up being more expensive to live down here than it already is,” Calvo said. “People will move out, and property values will go down.” “If the problem is not abated, that could be one effect, higher maintenance charges displacing people,” said the state insurance department’s Serio. “We haven’t yet heard those stories, but we’re still in the first year of the problem.” Insurance woes have also caused a slowdown in real estate construction. Congress is debating a “terrorism backstop” to limit the risk for insurance carriers, allowing them to provide more and cheaper coverage. Some observers expect an agreement on a bill after the election but there are still issues to be ironed out.