Attacks spread terror among premium payers.

• Position: Insurance

Every industry says it has endured economic fallout from Sept. 11, but it's insurers that have been hit with a record-breaking $75 billion bill. "Previously, the worst insurance catastrophe was Hurricane Andrew, with about $20 billion in insured losses," says Larry Roland, president of the Independent Insurance Agents of North Carolina. "Models used to calculate risks of the worst possible scenarios were up to about $40 billion."

In the wake of the terrorist attacks, commercial property-and-casualty insurers are being hit with price increases by their reinsurers -- companies that provide insurance for insurers. No major property insurers or reinsurers are based in North Carolina, but local agents have to break the news of higher premiums to their clients. "We're working daily to sort through the impact this will have on our North Carolina customers," says Roland, president of Senn, Dunn, Marsh and Roland in Greensboro. "It's a confusing time and more than a little frustrating."

Federal legislation that would provide terrorism insurance is in the works. Without it, insurers may be unwilling to provide commercial coverage. Or they'll provide it only at prices that put it out of reach for many businesses.

Upheaval in the property-and-casualty business came as insurers were already raising rates to compensate for lower returns on their investments. Insurers make money by underwriting -- collecting more money than they pay out in claims -- and investing. With the stock market faltering, they're turning to premium increases to shore up their bottom lines. In 2001, businesses saw premiums jump by as much as 10%. "They'll see 20% to 30% average increases in 2002," Roland says. "Some may even be more."

Jim Long, North Carolina's insurance commissioner, says his office received few requests from insurers for January rate changes. Some insurers did request terrorism exclusions, but they had to show complementary rate reductions. And, Long points out, any changes could be rendered moot by new federal laws.

State legislative action may be needed to shore up the North Carolina unemployment insurance fund. Nearly a quarter of a million unemployed workers received $780 million from the fund in 2001. During October, an all-time high of $95.3 million was paid out. Payments through October left a trust-fund balance of less than $760 million. As recently as January 2001, the fund had more than $1 billion.

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