Munich group boosts WTC reserves and shores up troubled American Re

Global reinsurer Munich Re announced that it will increase reserves relating to losses stemming from the World Trade Center (WTC) terrorist attacks by US$500 million to a total of about US$2.9 billion. The company will also inject about US$2 billion into its troubled U.S. subsidiary, American Re. Munich acquired American Re in 1996 for around US$2.5 billion, and was forced last year to boost the company’s reserves by US$1 billion.
Rating agency Standard & Poor’s says it has placed the Munich group on “credit watch with negative implications”. Munich currently holds a long-term “triple-A” rating. The rating agency says its action was based on the recent announcement that WTC reserving would be increases, as well as the poor position of American Re. Specifically, Standard & Poor’s says there is concern with American Re’s earnings and capital adequacy.