Insurers rate Seattle a top terror target

Seattle is among the top nine terrorist-target cities in America, according to an insurance-advisory group, meaning premiums for terrorism insurance could cost nearly 20 times more than in most of the country.

The Insurance Services Office (ISO) has ranked Seattle along with Los Angeles, Houston, Philadelphia and Boston as the "second tier" in a three-tier ranking of cities throughout the country most likely to be terrorism targets.

The most likely cities to be attacked are New York, Washington, D.C., San Francisco and Chicago, according to a complex risk analysis based partly on population and building data, partly on computer catastrophe modeling and partly on the gut checks of terrorism experts. According to the New Jersey-based ISO, these cities are 100 times more likely to be hit than the rest of the country.

Seattle and the second-tier cities are 20 times more likely to be attacked than the rest of the country, according to Dave Dasgupta, a spokesman for ISO.

ISO is one of the country's largest providers of insurance-policy and underwriting information for property and casualty insurers. Its recommendations are used by thousands of insurers to set premium rates.

Dasgupta said the three-tier system was implemented to help insurers set rates for terrorism insurance.

ISO is recommending that first-tier-city insurers charge customers 3 cents per $100 of terrorism coverage — roughly $300 for a $1 million policy. The guideline for insurers in second-tier cities like Seattle would be 1.8 cents for every $100 of coverage, or $180 for $1 million in terrorism coverage.

The recommended rate for the rest of the country is one-tenth of 1 cent for every $100 of coverage.

"These are benchmarks only," he said. "The companies aren't obligated to use these numbers."

The Sept. 11, 2001, terrorist attacks in New York, Pennsylvania and Washington, D.C., cost the insurance industry as much as $40 billion. Last November, Congress passed the Terrorism Risk Insurance Act of 2002, which indemnifies insurance companies for some of their losses due to acts of terrorism.

Before the act, a number of insurers quit offering terrorism insurance altogether or policyholders found that premiums had skyrocketed to the point they could not afford the coverage.

Samis Land, which owns the landmark Smith Tower near Pioneer Square, is paying an extra $30,000 for supplemental terrorism insurance.

"It hits the bottom line," said managing director William Justen. "It is not a huge number, but it is about the cost of hiring another building engineer."

It could have been worse, Justen said. The first quotes Samis got for supplemental terrorism insurance came in at around $80,000. That number dropped after Congress passed the risk-insurance act.

Unico Properties, which owns 11 skyscrapers in Seattle, Bellevue, Portland and San Francisco, was stunned when its insurer stripped terrorism insurance from its policy last year. The company had to pay an additional $300,000 to restore it.

"We just got killed," said John Lamb, the company's chief financial officer.

With the federal guarantees now in place, Lamb said renewing the terrorism rider should cost about $36,000.

"If another event occurs, all bets are off," he said.

Other industries or sites seen as possible terrorism targets have been hard-hit as well. The Seattle Mariners said insurance for Safeco Field jumped after the Nisqually quake in February 2001 and then jumped again after Sept. 11.

"It has gone up quite a bit," said spokeswoman Rebecca Hale, who declined to give specific numbers.

Seattle Art Museum spokeswoman Erika Lindsay said most museums — with their sometimes priceless and irreplaceable artwork — can't even get insurance anymore. Millions of dollars in art was lost in the collapse of the Twin Towers in lower Manhattan.

"Most of the major fine-arts-insurance carriers are no longer providing terrorism coverage," Lindsay said.

Seattle-based Safeco Insurance, which insures more than 500,000 small and middle-sized businesses around the country, began offering terrorism coverage to those clients "for a modest charge" this week.

"The price will vary — a business in downtown Seattle would be charged more than one in Bothell," said Safeco spokesman Paul Hollie. "Still, we would expect a rate of less than 1 percent of an overall policy."

Dasgupta said ISO's recommended rates were arrived at through comparisons of billions of premium records and the use of a sophisticated catastrophe-modeling program.

Jack Seaquist, who developed the terrorism-catastrophe model, said it included a databank of 300,000 landmark buildings throughout the country, configuring them into categories known to be of interest to various terrorist groups.

Population densities, proximities to ports and borders, and calculated casualties caused by a variety of weapons were considered.

"There isn't a lot of historical data for this," Seaquist said.

In the end, a group of terrorism experts combed the material and provided their own input. And that's one of the areas where Seattle, like New York and Washington, stood out.

Four years ago, Ahmed Ressam, an Algerian terrorist who trained in Osama bin Laden's camps, was captured in Port Angeles trying to smuggle bomb-making materials into the U.S.

Last year, at a bin Laden stronghold in Afghanistan, a computer was found containing photos of Seattle landmarks.

Later, James Ujaama, a member of a radical Muslim group at a Central Area mosque, was indicted for conspiring to support al-Qaida by setting up a training camp in Oregon.

U.S. intelligence sources have said the city has come up with disturbing frequency in investigations into al-Qaida and international terrorism.

"Those sorts of things have been an area of concern," Seaquist said.

Reporters Marty McOmber and Sheila Farr contributed to this report. Mike Carter: 206-464-3706 or mcarter@seattletimes.com