Ratings Analysts Narrow 9-11 Losses To About $3 Billion For L&H Industry

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Life and health insurance losses from the Sept. 11 attacks seem to be matching the original estimates.

The major insurance rating firms put out loss estimates of $2 billion to $5 billion in the weeks following the attacks.

Now that better numbers are available, Moodys Investors Service, New York, has revised its estimate to $3 billion in losses, with primary insurers paying $2 billion and reinsurers paying $1 billion.

Fitch IBCA, Duff & Phelps, Chicago, is estimating $2.7 billion in announced losses, with 30 primary life insurers paying $1.9 billion, and 25 life reinsurers and life units of multiline insurers paying $771 million.

Douglas Pawlowski, the Fitch director who compiled the report, says he expects the losses for primary insurers to hold steady and the reinsurance losses to continue to creep up.

“The primary insurer numbers are very good,” Pawlowski says. “Its more difficult for the reinsurers to come up with a concrete number right now.”

Pawlowski says one reinsurer, a life catastrophe pool run by Special Risk Pooled Administrators Inc., an affiliate of Lincoln National Corp., Fort Wayne, Ind., has not yet discussed its exposure.

SPRA can provide up to $125 million in individual policy reinsurance and $500 million in group policy reinsurance per catastrophic event, Pawlowski says.

Swiss Reinsurance Company, Zurich, is acquiring the unit from Lincoln National.

Representatives for Swiss Re and Lincoln National declined to comment while the deal was still pending.

Both Pawlowski and Robert Riegel, a managing director at Moodys, say the latest figures support earlier predictions that most life insurers and life reinsurers should be able to handle the Sept. 11 claims without too much difficulty.

The losses are small when compared with the primary insurers capital reserves and earnings; the average percentage of losses covered by reinsurance is low; and most of the reinsurers involved are strong, brand-name reinsurers, Riegel says.

“Its very different from the property-casualty side,” Pawlowski observes.

The figures Pawlowski has collected suggest the average life and health claim might be quite high.

The New York Times reports the count of people who had been declared dead by Dec. 4, or who appeared to be missing and were believed to be dead, stood at 3,385.

The average U.S. household that has life insurance has less than $200,000 in coverage, according to the American Council of Life Insurers, Washington.

The reported Sept. 11 life insurance loss figures could fall as insurers adjust projections to reflect actual claims experience.

But, if the figures collected by Fitch prove to be accurate, the average loss could be $797,000 per Sept. 11 fatality.

Few insurers are willing to provide an average, but those that do are citing figures ranging from $100,000 to $800,000 per policy, Pawlowski says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 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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