Canadian Underwriter

Munich group boosts WTC reserves and shores up troubled American Re

July 11, 2002   by Canadian Underwriter

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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.

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