It is said that the Lutine Bell at Lloyd’s of London has been rung 18 times in the last century, for such events as the sinking of the Titanic and the Lusitania.
But Denis Loring, who was on the floor of Lloyd’s on Sept. 11, heard the bell ring, this time tolling for the terrorist attacks on the World Trade Center.
Loring, executive vice president with RGA Financial Group in St. Louis, says Lloyd’s executives gathered around TV sets to watch events in New York unfold.
Loring says that to estimate claims Lloyds uses a realistic disaster scenario in which two 747s collide over New York City, but this goes completely beyond that.
Everyone will be impacted by this, he says, and for reinsurers it could be 6-8 weeks before there is a reasonable estimate of the dollar cost of damage and 6-9 months before there is a very accurate idea of these costs. “It will take a long time to have good numbers. This is the biggest loss the industry has ever seen,” Loring says.
Current estimates of costs to the insurance industry are in at least the $25 billion to $30 billion range, although according to one interview, an estimate as high as $50 billion is being floated for the industry as a whole.
Julie Burke, managing director with Fitch in Chicago, says the property-casualty end of the business will take the brunt of the financial hit, but that estimates of $2 billion to $3 billion for the life industry that have been quoted are not unreasonable.
Burke says Fitch is trying to get a sense of what companies are affected but “some of the companies are not necessarily sure where their risks lie.”
Interviews suggest that retrocessionaires, reinsurers of reinsurers, could be hard hit financially and that given the high incomes of many individuals in the Trade Center, insurers could face payouts of large death benefits from all kinds of life contracts. These would run the gamut from traditional whole life and term products to corporate-owned life insurance contracts.
Reinsurers say that catastrophe coverage, which limits large financial losses, and turning over risk to retrocessionaires will help limit their exposure.
David Atkinson, CEO of RGA Reinsurance and COO of Reinsurance Group of America in St. Louis, says one policy claim came in early last week, but it is still too early to tell how many claims RGA will receive.
RGA’s retention limit is in the in the $2million to $4 million range, he says, but very few policies are in the $4 million range because the company just went to that limit during the past year. The limit had been $2.5 million for the last three years and $2 million for ten years before that, he says, adding that the cat cover has a $1.5 million deductible and covers up to $100 million in losses.