D.C. Insurance Commissioner Lawrence H. Mirel said he will reject rate increases based on a new insurance study that classifies the nation's capital as a prime target for terrorist attacks because it could increase commercial premiums as much as 150 percent beginning next month.

Mirel sharply criticized the risk analysis as flawed and harmful to the city's economy.

"If what they presented were to stick, the District would become a ghost town," said Mirel, who added that the industry must recalculate its ratings or risk a regulatory standoff. "Nobody would be able to do business here. With that kind of an increase, everyone would leave for the suburbs."

The D.C. commissioner's objections offer a first glimpse at how insurers nationwide are setting about the difficult task of defining the risk of terrorist threats in dollars and cents. A new federal terrorism insurance law signed late last year by President Bush requires companies to begin offering coverage for potentially catastrophic losses by Feb. 24. The federal government agreed to cover 90 percent of damages in excess of $10 billion, up to $100 billion.

But while the law mandates coverage, pricing remains a problem for major cities such as Washington because there is little experience with terrorist attacks, yet the cost is potentially astronomical.

"Unlike other kinds of losses -- where there is lots of historical data and it is easier for rating agencies like us to come up with prospective loss-costs -- terrorism is something new and for which there is no historical data," said David Dasgupta, a spokesman for Insurance Services Office Inc. of Jersey City, a leading property and liability risk rating agency at odds with the District and New York.

"We have to rely on models and how severe the losses might be, depending on the targets chosen by the terrorists," Dasgupta said.

Washington officials are not alone in their concern. ISO's study placed Washington, New York, Chicago and San Francisco in the highest of three risk tiers, regulators said. A second tier consists of Los Angeles, Houston, Philadelphia, Boston and Seattle. The rest of the country fell into a third tier. ISO rated the first-tier cities 100 times riskier than the rest of the country and the second-tier cities 10 times riskier, regulators said.

Dasgupta declined to discuss the rankings, how potential targets were selected or other aspects of the risk model, citing proprietary reasons. He said ISO has not formally filed with the District or California, New York or other states with large cities. The company has shared the information in informal talks, regulators said.

Property owners in the District and other large cities have seen multifold premium increases for property, liability and workers' compensation coverage since the Sept. 11, 2001, attacks. At the same time, insurers have dropped terrorism coverage -- previously a free add-on -- or increased its price by 10 to 20 times in high-risk areas, prompting federal action.

Montana State Auditor John Morrison (D), who chairs a National Association of Insurance Commissioners task force on terrorism insurance, said his colleagues are watching closely: "What we will be looking for is to ensure that this terrorism risk pricing process does not become an opportunity for price gouging."

California Insurance Commissioner John Garamendi (D), inaugurated yesterday, said he anticipated a petition from businesses to launch a full state rate review.

ISO officials defended their analysis, which was based on a study by the firm's Boston weather-risk subsidiary, AIR Worldwide. In the absence of data, AIR surveyed five former FBI, CIA and Pentagon intelligence experts and applied their opinions to a database of 300,000 potential targets, AIR spokesman Mike Gannon said.

"When you look at it from a logical standpoint, most targets are going to be in urban, heavily populated areas, with more buildings and more targets than, say, rural Kansas," Gannon said.

But Washington's Mirel faulted ISO's approach. "The methodology is the notion, if you don't have any hard data, you ask people what they think," he said. "I think that stinks. You might as well ask me what I think."

The way ISO has categorized risks by state, commercial insurance policyholders in neighboring Virginia and Maryland suburbs, such as Arlington, where the Pentagon was struck, would face increases of less than 1 percent of those in the District, Mirel said.

Mirel said that he has told ISO he would not accept such high rates and that the firm asked to meet.

Under D.C. statute, rating firms can appeal the insurance commissioner's decision to the D.C. District Court of Appeals or simply publish their findings. It would be up to individual insurance companies whether to offer coverage at a rate acceptable to the commissioner's office or pull out of the District.

New York Department of Insurance Superintendent Gregory V. Serio said initial estimates presented to regulators across the country appear to punish big cities.

"We are foursquare with Commissioner Mirel on this question of making sure that Washington, D.C., New York and other large cities are not disparately treated compared to the rest of the country," Serio said.

Nationally, rating organizations such as ISO began filing risk assessments -- known as "loss-cost" advisories -- to states in late December. Most insurance companies too small to collect and analyze actuarial data on their own use ISO's data to calculate premiums. Large insurers use their own data to set prices for policyholders but take ISO's actions into account.

Insurance costs were climbing even before the industry recorded its largest loss of $40 billion Sept. 11, 2001. Even after their terrorism coverage was dropped or priced out of sight, real estate interests, universities and downtown institutions in New York and Washington encountered 50 percent to 100 percent premium increases.

Business leaders said they fear that a second wave of increases would worsen a general slowdown in which rents have fallen and office vacancy rates have hit 8.1 percent in the District, a three-year high, and 11.8 percent in Manhattan.

Property insurance premiums at Washington's RFK Stadium, for example, 20 blocks east of the U.S. Capitol, tripled last year from $200,000 to $600,000, or from 2 percent to 6 percent of annual operating costs.

A 150 percent increase could boost that ratio to 15 percent, said D.C. Sports and Entertainment Commission President and Executive Director Robert D. "Bobby" Goldwater. "Any further increase will make our situation even more dramatic and would certainly affect how we are able to operate," said Goldwater, whose agency is part of an effort to recruit a Major League Baseball franchise.

Shaun Pharr, vice president of governmental affairs for the Apartment and Office Building Association of Metropolitan Washington, whose members own or manage 185,000 apartment units and 121 million square feet of office space, is also concerned.

"It really finally becomes, truly, a competitive disadvantage," he said. "You won't see these types of costs in Reston or Rockville."