Insurance bill mounts further

The World Trade Center attack is likely to be the most expensive disaster ever

The insurance bill for the World Trade Center attacks has climbed further, with more than $12bn in losses already admitted, and much more likely to come.

Loss estimates

ACE and XL Capital: $1bn-1.1bn

AIG: $500m

Allianz: $930m

AXA: $300-400m

Berkshire Hathaway: $2.2bn

Chubb: $500-600m

CNA Financial: $200m-350m

Employers' Re: $600m

GE: $600m

Hannover Re: $365m

Munich Re: $1.95bn

Partner Re: $350-400m

Royal & Sun Alliance: $220m

Scor: $150m-200m

Swiss Re: $1.25bn

Zurich Financial: $400m

Over the past few days, the world's biggest insurers have sharply hiked their estimates for the liabilities they face.

One firm, US reinsurer Berkshire Hathaway, now says it expects a loss of $2.2bn (£1.51bn; 2.39bn euros) - the biggest liability figure announced by an insurer so far.

The new numbers made it likely, say analysts, that the overall bill could exceed the $20bn initially predicted.

Estimates for overall liabilities currently range from $30bn (£20.6bn; 32.6bn euros) to more than $50bn (£34.3bn; 54.4bn euros).

Worst affected

Berkshire Hathaway, which is controlled by billionaire financier Warren Buffett, had previously said it would pick up the tab for 3-5% of the overall insurance bill.

Berkshire's Buffett faces the single biggest insurance bill

By that reckoning, the firm's $2.2bn figure equates to an overall bill to $44-73bn.

Although that figure is still seen as unlikely, other reinsurance firms have been busily raising their own preliminary estimates.

Munich Re and Swiss Re - the world's two largest reinsurance companies - have doubled their estimates to $3.2bn.

German insurance giant Allianz said on Friday it faces claims of $930m, compared with an earlier forecast of $640m.

And US-based Chubb, which earlier said it stood to lose $1-200m, has hiked its prediction to $5-600m.

Other insurers, including Bermuda-based ACE and XL Capital, US business insurance giants AIG and Chubb, Zurich Financial and GE have all issued estimates in the hundreds of million of dollars.

But the UK's Royal & Sun Alliance said that, after further reviews of liabilities, it was sticking to an earlier claims estimate.

"Based on our review, we confirm that our estimate of loss, net of reinsurance and before tax relief, remains approximately £150m," the insurer said on Friday.

Credit crunch

The extent of the claims has considerable implications for the health of the insurance industry.

Lloyd's is reluctant to talk specific numbers

Credit rating agency Standard & Poor's (S&P) has already downgraded Zurich Insurance and Lloyd's, the London-based insurance market.

Lloyd's has refused to discuss specific liability figures stemming from last week's attacks, but admits that it is "substantially" involved.

S&P has now put Lloyd's, Zurich and 15 other insurance businesses on its Creditwatch list of firms closely monitored for evidence of a further financial deterioration.

The agency said that the attacks could produce "catastrophic losses"

S&P said, however, that no leading insurer or reinsurer yet faced insolvency, and that losses would have to reach $50bn before the industry's ability to meet liabilities would be compromised.

Premiums hiked

Insurance premiums are seen as likely to rise as a result of the attacks with additional costs for terrorist specific policies.

Already, higher insurance costs have hammered activity in the airline and shipping sector.

Munich Re said it would undertake a "fundamental reassessment of the risk situation" when reinsurance policies come up for renewal in the last quarter of the year, "as the attacks have revealed a previously unimaginable risk potential".

"Primary insurance and reinsurance coverage, as well as terms and conditions will have to be completely rethought," the firm said.

The largest insurance loss to date involved Hurricane Andrew, which hit Florida in 1992, generating $16bn in losses, or $19bn in today's terms.