The global insurance industry can withstand the US terrorist disaster's financial impact, likely to be the biggest ever, rating agency Standard and Poor's said Friday, September 14. "While we cannot yet endorse a specific estimate, companies so far have acknowledged around four billion dollars in losses, a figure which will likely go much higher," the New York-based agency said.
"Once insurable losses exceed $10 or $15 billion, we would expect to see a significant impact on balance sheets of individual insurers," it said in a statement. "However, the totals would have to exceed $50 billion before we would begin to worry about the insurance system."
Assessments of the financial damage were speculative, said the New York-based agency's managing director for US insurance industry ratings, Steve Dreyer. "But the insurance industry is strongly capitalized and can withstand an enormous financial hit without threat to the stability of the system overall."
For example, he said, Hurricane Andrew in August 1992 cost the industry approximately $20 billion in current terms and the 1993 World Trade Center bombing hit the insurance industry with under one billion dollars in losses.
Insurance losses from the terrorist attacks were spread among many of the world's largest and strongest insurers, such as AAA-rated Chubb, which had reported a maximum exposure of $200 million for property claims, and AAA-rated Swiss Re, which had reported one billion dollars in expected claims, the agency said.
Insurance coverage likely to be most affected included life, disability, workers compensation, health, business interruption, property, and general liability, it said. Standard and Poor's said it would contact insurers in coming weeks and would assess the impact on individual insurers.
Life insurance losses were expected to be in the low, single-digit billions of dollars, which was not likely to cripple the industry, the credit appraiser said. There could be some delays in payments on life insurance policies as the identification process was completed, it warned.
Key technical questions about the insurance industry after the attacks remained, the agency said. They included the question of whether US insurers had excluded terrorism from their covers. A critical point for liability would be whether the crashes and building collapses would be considered a single event, it added.
Doubts remained over how the disaster would affect a slide in equity asset values and the impact on reinsurance pricing, which could rise substantially, the agency said. Standard and Poor's said its insurer and reinsurer financial strength ratings already incorporated an allowance for near-term volatility caused by changes in the economic cycle and periodic major losses.
"Nonetheless, certain individual ratings may come under pressure in due course if claims and asset value reductions are found to compound existing weaknesses and lead to a permanent reduction in financial strength due to a seriously depleted capital base or loss of financial flexibility," it said. ― (AFP, Washington)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
