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Friday, 21 September, 2001, 14:27 GMT 15:27 UK
Insurance bill mounts further
New York in ruins
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.

Warren Buffett
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.

The Lloyds insurance market
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.

David Worsfold, Post magazine
"There has never been a claim that has involved so many categories of insurance"
See also:

26 Sep 01 | Business
Insurance costs 'incalculable'
12 Sep 01 | Business
Insurers face record claims
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