February 20, 2004 by Canadian Underwriter
Regardless of the outcome of the trial now underway to determine how much will be paid out on the World Trade Center (WTC) destruction, insurers involved will not see a ratings impact, says Standard & Poor’s.
The jury trial will decide if the collapse of the WTC Twin Towers on September 11, 2001 will be deemed one occurrence or two. WTC leaseholder Larry Silverstein is arguing the events constitute two separate events, and therefore he should be paid twice on his insurance policy, for a total of more than US$7 billion. The group of insurers, led by Swiss Re, says the terrorist attacks are a single event and therefore only the policy limit of US$3.55 billion should be paid out.
“Under the worse-case scenario for the insurers, a verdict in favor of the Silverstein interests would result in a doubling of the original policy limits of US$3.55 billion,” points out Steven Dreyer, managing rirector of S&P’s insurance ratings services. “Although the amount is obviously significant, the loss is well spread across the insurance industry.”
He notes that the insurance program involved a primary layer and 11 excess layers involving more than 20 insurers. Swiss Re’s stake is about 25%, and represents the largest of the group.
Compared to other aspects of the 9/11 insured losses, the WTC payout is “relatively small”, S&P says. For example, business interruption payouts have already reached US$8 billion.
S&P notes that insurers can take solace in that very few families, just 70, opted out of the federal victims’ compensation fund and are eligible to seek compensation against corporations, agencies or the government.