All that is about to change in a big way and not just for Estes. Virtually every company in the nation is bracing for a big jump in their property and casualty premiums in the wake of the Sept. 11 terrorist attacks. Depending on the type of business, property, claims history and location, most are likely to see whopping increases of 30 percent while some in higher-risk businesses may see their rates double.

For now, though, it is all a matter of speculation. Insurers and re-insurers — the companies that insure the insurance companies — are uncertain of the final

tally of the attacks, though some analysts are estimating losses of as much as $70 billion. For the time being, most are not willing to provide quotes until they have a better feel for the total cost of Sept. 11 and what the federal government will do in response. Says Estes, referring to discussions the company has had with its insurer, Aon Corp. of Chicago, about coverage for 2002, "We have been told there will be an increase, but not how much. The word they used was ‘substantial,’ but we have no real feel for the percentage or dollar amount of the increase."

For companies on both sides, the attacks could not have come at a worse time. Already facing a slowing economy, the premium increases will likely shrink bottom lines of many companies buying property insurance, even putting some in the red. Yet, it is no treat for insurers, either. Some have had to sell stock holdings to pay a great boost in claims while the S&P 500 is 29 percent below the record levels set in March 2000.

Many are waiting to see what comes of congressional efforts to make the Treasury the re-insurer of last resort for terrorism acts on U.S. soil. The bill favored by the Bush Administration would have taxpayers cover 90 percent of losses exceeding $20 billion. The government also would help cover catastrophic losses in 2003 and 2004, as well, but would end coverage in 2005. The industry favors a six-year plan modeled after the one used in Great Britain, whereby the government picks up any losses above the amount put into an industry-wide pool. In Britain, the system allowed companies to get more coverage against damage and business interruption caused by terrorism than the very limited amounts individual insurers were willing to provide on their own in the wake of a number of IRA bombings in the early 1990s. But the system is expensive. Premiums for some companies were said to have jumped 300 percent in the mid 1990s when concern about the bombing campaign peaked. They have declined in recent years as the threat has waned.

Either the Bush or British plan is preferable to the current system, says John Keefe, an analyst covering insurance companies for Ferris, Baker Watts in Richmond. "Even proponents of small government promote government insurance of terrorism events," he says. Others are less sure. Chris Roush, editor of InsuranceInvestor, a publication of SNL Securities LC in Charlottesville, says that regardless of tax laws preventing insurers to set aside reserves for potential catastrophes, the industry still had more than $300 billion in reserves as of June 30. Even more telling, he said it is unlikely that insurers will limit premium increases even if the federal government assists the industry. "I think [the insurance companies] are going to try to get what they can get as soon as they can get it," Roush says. "This is not really crippling the industry."

In those markets where increases have taken effect, the toll is already being felt. Feeling the punch are cruise line companies. Stephen Johnson, president of Flagship Group Ltd., a Norfolk-based subsidiary of Daytona Beach, Fla.-based Brown & Brown Inc., an insurance broker, says premiums for war risk on cruise ships rose after Sept. 11 to $750,000 per year, from $50,000 before the attacks. The increases, he says, have "been materially affecting" the bottom lines of some cruise-ship operators. One such operator, Chicago-based American Classic Voyages Co., filed for bankruptcy protection in late October, though the already-troubled company blamed cancellations and reductions in bookings for the filing.

It is not just on the high seas or in big cities where property insurance rates are rising, either. Companies in the Shenandoah Valley around Staunton are also facing higher rates, says Stuart Cochran, vice president with Insurance Partners of Virginia, a Staunton-based affiliate of Bankers Insurance. "On some of our larger companies, insurers are saying that while they like the [companies and their risk profiles] very much, they say they can’t tell us what the rates are going to be yet because their re-insurers aren’t ready to quote for Jan. 1," Cochran says. He, too, is warning of premium increases of 30 percent to 50 percent, depending on the company and the number of insurers interested in writing policies in that industry. "There are not a lot of people out there interested in writing policies on long-haul trucking companies," he says.

Still, not all the news is bad. Robin Ray, president and CEO of Atlantic Dominion Distributors, a distributor of Anheuser-Busch products in Virginia Beach, says the decline in gasoline prices is likely to have a bigger impact on her bottom line than an increase in property insurance rates would. Likewise, previously moribund insurance company stocks have gained more than 15 percent since reaching bottom in mid-September, according to SNL Securities. During the same period, the S&P 500 gained just 9.8 percent.

For the most part, however, companies are just learning to cope with the increases. Estes says his company will use more caution when considering business investments for the coming year. He also is considering ways to recoup the higher premiums. "It’s not something that’s going to change our business strategies, though it certainly forces us to look at our business and try to get higher charges for what we do just to compensate for the increases," says Estes. "That’s not the easiest thing to do in tough economic times."

Estes, like many others, has a variety of options to limit the crush of premium increases. One way is to increase its already high deductible. Another he is considering is the creation of a captive insurer to give the company access to more insurance markets. Even if it opts for the latter, he admits it will not provide any relief for at least six months.

Ultimately, it is a matter of recognizing that the cost of business has risen, he says. "You can’t risk your equity. You can assume certain portions of [the risk], but [insurance] is something you have to have." It is especially important in uncertain times like these.