Life Insurers Say They Have The Strength To Withstand Losses

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Despite what could be some hefty losses, life and health insurers say they will easily be able to handle claims from the terrorist attacks on the World Trade Center in New York City and the Pentagon in Washington, which killed an estimated 5,000 to 6,000 people.

National Association of Insurance Commissioners President Kathleen Sebelius says she is preparing a response to the House Financial Services Committee, which has asked the NAIC for reassurance that insurance companies are financially strong enough to shoulder the tragically high claim burden.

In an interview, Sebelius said she will address the issue of insurer solvency in Washington to the committee at a hearing in Washington Sept. 27. She says she is still compiling information from the major insurers to determine the financial impact of their losses.

Standard & Poors London office stated last week that the rating agency is likely to put on credit watch “with negative implications” many insurers and reinsurers with exposure to the calamitous losses.

S&P has initially estimated net aggregate losses of $14 billion among 55 leading insurers and reinsurers. It did not have a breakdown of life losses in that figure, but a spokesperson says that 9 or 10 of the insurers surveyed were primarily life carriers.

Losses above $15 billion are likely to have a significant impact on the balance sheets of individual insurers, the rating service says.

Another rating agency, Fitch, in Chicago, says claims for life/health insurers, including accident policies, would probably be “several billion dollars.”

Moody’s Investors Service, in New York, says U.S. life insurance firms “will unquestionably face significantly higher-than-normal levels of mortality and morbidity claims, as well as investment losses.” But that would not weaken the companies financial strength and flexibility, according to Moody’s.

While declining to make a specific estimate of losses, Moodys said a “plausible” estimate would be in the $2 billion to $5 billion range.

Prudential Insurance Company of America says the disaster will not materially affect it financially, although like many carriers, it did not give estimates of its actual exposure.

John Hancock Financial Services Inc., in Boston, says it thinks the effect of the attacks would not be financially material and that it continues to expect earnings-per-share growth of 10% to 12% this year.

Hartford Financial Services Group Inc., in Hartford, is expecting up to $450 million in claims after taxes and net of reinsurance from the WTC destruction. Of that amount, an estimated $30 million would be on life insurance policies.

Lower equity markets are also likely to hurt Hartfords life operations by 5 to 10 cents per share for the fourth quarter, the company estimates.

Metropolitan Life, in New York, says its expects total insurance losses from the attacks to range from about $250 million to $300 million, with per share impact for the third quarter expected to range from 35 to 40 cents.

With a small office on Tower Ones 89th floor, Met Life reported two financial reps and one personal marketing assistant missing last week.

MONY Group, in New York, says, “We certainly have more than adequate liquidity and capital to meet our commitments.”

New York Life Insurance Company ballparked its financial exposure as being in the range of $50 million to $75 million.

The company says its exposure “is minimal in light of our financial strength.”

AIG estimates its losses would total about $500 million across a broad range of coverages and would not have an adverse impact on its financial strength.

Aetna, in Hartford, said it expected the events of Sept. 11 would have “some financial impact” from life, disability, long-term care and accidental death and dismemberment policies, but that these would not affect its financial stability. It expected claims ranging from $10 million to $15 million before taxes, compared to normal annual life insurance claim payouts of about $1 billion.

Effects on its financial portfolio would be minimal, Aetna added.

AXA Financial, Inc., parent of Equitable Life, in New York City, said it was confident it could adequately deal not only with claims from the disaster, but also financial market conditions in the weeks ahead.

Northwestern Mutual Life, in Milwaukee, also said it had ample liquidity to pay all claims.

ING Group, headquartered in the Netherlands, estimates it will see $46 million in individual and group life claims from the U.S. tragedies.

“It is too early to say whether and to what extent the worldwide consequences of the tragedy in the United States will affect our profit expectation for the year 2001,” the company stated.

Nationwide Financial Inc., in Columbus, anticipated the calamity would have not material impact on its financial strength or performance.

In an ironic turn of events, one of the most telling loss estimates reported was distressingly low.

Empire Blue Cross/Blue Shield, which had been headquartered from the 19th to 31st floors of Tower Two of the WTC, said claims from the tragedy were actually much below what it had expected, according to a spokesperson. The implication of so few injuries is that fatalities were high, she notes.

Empire BC/BS is grateful for one thing: out of 1,914 employees at the WTC, only nine remain unaccounted for. Three others are still in the hospital, says the spokesperson, Soraya Rodriguez.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 24, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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