Canadian Underwriter

Zurich doubles WTC loss estimate

October 9, 2001   by Canadian Underwriter

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Almost a month after the terrorist attacks on the World Trade Center (WTC) and Pentagon, Zurich Financial Services Group is doubling its loss estimate. The company now says pretax losses could reach between US$700 million and $900 million, although on September 12, the day after the attacks, it had come in with a US$400 million figure.
The company says that although this represents that largest loss in its history and will certainly affect its projected earnings for 2001, the loss represents only 2% of its gross premium volume of US$55 billion. The company has seen its stock drop, partly in response to the lack of up-to-date loss estimates causing shareholder uncertainty.
The $200 million range in the estimate is the result of uncertainty around the outcome of liability claims, the company notes.
In further related news, a new debate is raging over whether the September 11 events should be classified as one loss event or not. Insurers argue that the events, because they were part of an organized, cohesive attack, should be classified as one event. For the purposes of reinsurance, excess of loss would come for the total sum of losses stemming from the event. And claims would be paid out based on a single loss.
The debate is furthered by WTC leaseholder Larry Silverstein seeking double payment on his insurance policy because two planes were flown into the towers. He is seeking a total of US$7.2 billion, double his US$3.6 billion coverage, based on the attacks beign classified as two separate events. The policy on the WTC is held by several insurers including Chubb, Swiss Re, Allianz, XL Capital and Ace, who are disputing Silverstein’s claim.
In another related story, the U.S. federal government appears close to drawing up a bill to create a national reinsurance pool. Although the pool would be federally-backed, with the government collecting premiums in exchange for retrocessional coverage, there is some debate about whether the program should be state-chartered or not. Insurers have put forward a plan to create a voluntary, privately-run pool such as exists in the U.K.

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