NU Online News Service, Sept. 14, 10:25 a.m. – Standard & Poor’s predicts the Sept. 11 terrorist attacks on the Manhattan World Trade Center complex, the Pentagon and commercial passenger jets will be big, but not big enough to do severe damage to the insurance system.
“The financial losses relating to the disasters will in all likelihood exceed the largest insured losses ever yet seen,” S&P says in a statement.
S&P, which is normally based in New York but is now running its operations from London as a result of the trade center attacks, estimates total losses for life insurers will be “in the low, single-digit billions of dollars, which is not likely to cripple the industry,” S&P says.
A smaller rating firm, Weiss Ratings Inc., Palm Beach Gardens, Fla., recently reported that U.S. life insurers generated a total of $3.4 billion in profits for the first quarter alone, even though the first quarter was a tough quarter.
Although life insurers appear to have the resources to pay claims, beneficiaries may face some delays as a result of the difficulty of identifying the dead.
S&P declined to give an estimate of the total property-casualty losses, but it said the insurance is strongly capitalized and can withstand an enormous financial hit without serioiusly weakening.
Carriers have acknowledged about $4 billion in losses so far. Although the total is likely to much higher, it would have to exceed $50 billion before analysts would worry about the stability of the insurance system, S&P said.
Hurricane Andrew, which flattened some southern Florida communities in August 1992 but killed fewer than 60 people, cost the property-casualty insurance system about $20 billion in 2001 dollars, S&P noted.
Back in 1918, U.S. life insurers faced $125 million in claims — about 0.5% of 1918 U.S. gross domestic domestic product, or the equivalent of $50 billion in 2001 dollars — as a result of a catastrophic influenza “pandemic” that killed 550,000 U.S. residents. National Underwriter reported at the time that most carriers paid claims immediately, and that few ran into serious financial problems as a result of the pandemic claims.
Representatives for the American Council of Life Insurers, Washington, say they doubt any U.S. life insurers will use terrorism or war exclusion clauses as a reason for denying trade center claims, but rating analysts are wondering whether reinsurers might have included terrorism or war exclusion clauses in reinsurance agreements, S&P says.