- The Washington Times - Thursday, May 30, 2002

Insurance rates for apartment buildings, already rising since the September 11 terrorist attacks, will increase even more now that the FBI has warned that terrorists could be renting units to store explosives.
The premiums jumped 60 percent this year, according to Marsh & McLennan, one of the nation's largest insurers. The projection for next year is an increase between 50 percent and 100 percent.
"Prior to September 11, apartments, which are considered under commercial insurance, were increasing at about a rate of 30 percent," said Loretta Worters, spokeswoman for the Insurance Information Institute, an industry trade group.
The Apartment and Office Building Association, a nonprofit organization representing owners and managers of 185,000 apartment units and about 121 million square feet of office space in the District, Maryland and Virginia, is reporting that its members are having difficulty getting insurance this year.
Landlords, who pay insurance yearly and add it as a small portion of tenants' rent, are sure to pass on the expense to their tenants, Ms. Worters said.
"It depends on the city, because some cities have limitations on how high rent can go, but certainly, landlords will want to pass some of that on to tenants and will probably seek higher rates," she said.
Insurance typically makes up between 2 percent and 3 percent of rent. In 1999, that meant about $20 a month on average per apartment, Ms. Worters said. This year, that share is up to about $40 to $50 per unit and is still rising.
The apartment rental industry is huge. About one-third of Americans rent their housing, and 15 percent of all U.S. households live in apartments.
Prior to September 11, "it was uncommon to have an apartment firm experience 50 [percent] to 100 percent increases in its general liability," said Jay Harris, vice president of property management with the National Multi Housing Council, an association representing some of the nation's larger apartment companies.
Next year's apartment-insurance rates are feared to be even higher because of a recent memo issued by the FBI.
The memo, sent to the National Multi Housing Council and other apartment groups, read:
"There are indications that discussions were held about the possibility of renting apartment units in various areas of the United States and rigging them with explosives."
The FBI advised that it would pass on further information as it gathers details or substantial news.
Just hours after the FBI released its memo, an apartment building blew up in Encino, Calif., sparking new fears about terrorist attacks. But a fire department investigation found it was caused by a gas leak.
Insurance-premium quotes in the D.C. region are prohibitive and "extraordinary efforts" are being put into additional coverage terms, according to the Apartment and Office Building Association. Some business deals are even being stalled because of coverage uncertainty.
A local property manager for a large apartment company said he had not renewed his insurance this year. He said he is dreading the time when he has to.
"I imagine we're going to get hit with really high rates," said the property manager, who spoke on the condition of anonymity. "My understanding is that everyone is."
Dennis Dila, accountant at Kriegsfeld Corp., which manages some 50 buildings in the District, said that he, too, is uncertain about how much the company's rates will rise.
"We got a warning from the insurance company that they will increase, but I don't know how much yet," he said.
Another property manager, Cong Tran at Nine-Twenty-Five Apartments in Northwest, said rising insurance prices are unpleasant, but there is little he can do about it.
"Insurance is something that we have to pay anyhow," he said. "Whoever is staying with us they don't pay insurance, it's just absorbed in our policy. But we have to pay it, regardless of it going up or not. We can't complain."


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