stats
ctvnews.com
The Globe and Mail
globeandmail.com
spaceHome   spaceHomespace
spacer
spacer
Attack on the U.S. For the latest breaking news go to globeandmail.com or ctvnews.com
spacer
space
The Globe and Mail

  Article Search
space
  
space
   Quick Searches     Tips
space
space
MAIN PAGEarrow
Line
STRIKING BACKarrow
Line
HOMEFRONTarrow
Line
BIOTERRORISMarrow
Line
CANADA'S ROLEarrow
Line
FROM THE FRONTLINEarrow
Line
ANALYSISarrow
Line
COMMENTarrow
Line
HUMAN IMPACTarrow
Line

VIDEO ARCHIVEarrowLine
INTERACTIVEarrowLine
PHOTOSarrowLine
RESOURCESarrow
Line
HAVE YOUR SAYarrow
Line

THE AFTERMATH
Line
Business Impactarrow
Suspectsarrow
Builduparrow
Recoveryarrow
The Investigationarrow
Line

HOW IT BEGAN
Line
What happened?arrow
In New Yorkarrow
In Washingtonarrow
In Canadaarrow
Around the worldarrow
Eyewitness accountsarrow
Wall St. paralyzedarrow

Line



ATTACK ON THE U.S.

Saturday, Feb. 4, 2006

Insurance - Sector braces for record payout `Claims will be in the billions'; costs could threaten world's largest firms, experts say
By SIMON TUCK, The Globe and Mail
Wednesday, September 12, 2001

The global insurance industry potentially faces its own disaster following Tuesday's terrorist attacks in the United States, as it braces for what experts say will be the largest payout ever for the effects of a man-made event.

While the costs - and liability - associated with the attacks will almost certainly take years to sort out, insurance industry experts say claims could easily top the $3-billion (U.S.) that insurers paid out for the Piper Alpha oil platform explosion in 1988. That event, which occurred off the coast of Britain, was the most expensive man-made event to date.

“It is safe to assume claims will be in the billions,” said Robert Hartwig, chief economist for the Insurance Information Institute in New York, who witnessed the crashes of two planes into the World Trade Centre, which toppled its two 110-storey towers.

Lombard Street Research says tentative estimates of the insurance loss from Wednesday's events are at least $20-billion, a figure that would have a “devastating effect” on some insurance companies.

Industry officials said Tuesday that it's too early to put a meaningful price tag on the effects of the disasters, but that the costs will dwarf contingency funds and could potentially threaten some of the world's largest insurers.

“A disaster like this, depending on the wording [of the policies], could severely affect their ability to stay in business,” said Robert Carter, chief executive officer of the Insurance Brokers Association of Ontario.

But the industry's leading players moved quickly Tuesday to insist they'll be afford to stay in business and take care of their policyholders. Germany's Munich Reinsurance AG, one of the world's largest reinsurers, said the claims are likely huge but that the company had provisions “even for damages of this dimension.

“The financial strength of Munich Re has not been put into question,” chief spokesman Rainer Kueppers said.

Swiss Reinsurance Co. of Switzerland, the world's second-largest reinsurer, said Tuesday it was impossible to estimate its exposure.

Warren, N.J.-based Chubb Corp., known for offering corporate property insurance, said it has “significant property exposure” at the World Trade Center, but reinsurance, should limit its pretax losses to between $100-million and $200-million. Large property and liability coverages are usually spread out among insurers and reinsurers to avoid overwhelming claims on any one insurer.

Some observers weren't so confident about the industry's ability to pay. Andy Cook, editor of Insurance Today, told a news service that Lloyd's of London, in particular, could be hit hard. “Lloyd's has been getting stronger in recent years,” he said. “But this could cripple it. The claims from Tuesday's attacks could well be on the same scale as the combined claims from asbestos, the storms of 1989 and the Exxon Valdez tanker disaster, which forced it into the problems it had before.”

Share prices of insurance and reinsurance firms, which absorb much of the risk from front-line insurance companies, were hammered within minutes of the first reports about the attacks in New York. The Dow Jones European stoxx insurance sector index fell 11.5 per cent.

The industry's two wings face a variety of claims associated with the attacks, including the two World Trade Center towers themselves, damage to surrounding buildings, the costs of relocating businesses, the airplanes involved in the attacks, liability associated with the shutdown of North America's airline industry, and the life insurance for those killed in the attacks. Industry officials say the World Trade Center was insured for about $1.5-billion.

Some industry officials also said the torrent of hefty claims could cause the global giants to try to reclaim some of their costs by raising prices on a wide range of insurance policies, from house to car. “If they get hit hard enough, it will affect every kind of insurance premium you pay around the world - no matter what it is,” Mr. Carter said.

Officials also said that the disasters come at the worst time from the point of view of insurers and policy holders, because insurers are now in their annual negotiations with the reinsurers to set the insurers' rates for the year. “This is the time that [the talks] start to happen,” said Stan Griffin, a vice-president with the Insurance Bureau of Canada.

The Canadian industry was already facing tough times, Mr. Griffin said, after increasing auto insurance payouts and the ice storm that hit parts of Quebec and Ontario more than three years ago. Profits, he said, have been “pretty well the worst in history” so far this year.

Unlike in most other countries, U.S. insurance policies do not generally exclude claims related to terrorist acts, provided they are intentional. Insurers paid out hundreds of millions of dollars after terrorists bombed the World Trade Center in 1993. Most policies will also cover damage from fire and explosions.

But U.S. governments, particularly the federal government, could also be on the hook for some of the damage, insurance industry officials said. “These kind of random tragedies are rarely insurable,” said George Anderson, chief executive officer of the Insurance Bureau of Canada. “This is a classic tragedy ... why we have governments.”

Officials suggest that liability will likely take years to sort out and will ultimately be dealt with in court. “I'm sure the courts will be involved,” Mr. Griffin said.

With files from news wires






 PHOTOS

Life Goes On
space

SPECIAL
Voices From After the Fall, The Facts Behind the Fear, and the preview of a new Discovery documentary filmed at Ground Zero.


VIDEO






space THE LATEST:
   (RealPlayer required)

space
  • Six-month Memorial for Sept. 11 - U.S. President George Bush speaks from the White House. "The terrorists will remember Sept. 11 as the day their reckoning began," he said.

  • In Canada - Relatives of Canadian victims of the World Trade Centre attacks wonder why there's no six-month memorial here at home.

    CTVNEWS.com video reports



  • Copyright © 2001 Globe Interactive, a division of Bell Globemedia Publishing Inc.
    Help & Contact Us | Back to the top of this page


    spacer
    [an error occurred while processing this directive]