Insurance claims to reach billions
Tragedy kicks in coverage for life, property, workers comp
By Kristen Gerencher & Mike Tarsala, CBS.MarketWatch.com
Last Update: 1:53 PM ET Sept. 11, 2001
SAN FRANCISCO (CBS.MW) -- Insurance claims from Tuesday's attack on the World Trade Center and Pentagon are certain to reach into the billions of dollars, covering loss of life, property and injuries.
"When you draw comparisons with other man-made disasters in U.S. history, this will be the largest," said Candysse Miller, a spokeswoman from the Insurance Information Institute in Los Angeles.
Claims stemming from Tuesday's attacks are expected to far surpass the largest, non-natural U.S. disaster to date, the Los Angeles riots of 1992, which cost $775 million in overall insurance losses, she said.
The 1993 bombing of the World Trade Center brought $510 million in claims and the Oklahoma City bombing, the worst act by a domestic terrorist, wrought $125 million six years ago.
Insurance experts agree its impossible to estimate a dollar figure for claims that will result from Tuesday's apparent terrorist attacks, but they anticipate payouts for loss of life, property and auto damage, workers' compensation and business interruption to set a record for a U.S. catastrophe.
It's unclear whether the insurance market's reserves, known as reinsurance, will be able to pay out massive claims. The Federal Reserve said it would provide additional money to support relief efforts as needed.
"At this point, we can't even speculate" on the industry's ability to cover the losses, Miller said. "Clearly, this is the sort of event no one could've anticipated, but there are people in the insurance industry (trained) to plan for the worst."
Property policies typically cover terrorism but they exclude acts of declared war, she said. Still, at a minimum, there will be health insurance claims from the thousand injured and workers' compensation claims.
"It will be enough of a magnitude in that it may trigger some disaster planning from an insurance component," said Robert Hunter, director of insurance for the Washington, D.C.-based Consumer Federation of America.
There may be some sort of temporary federal reinsurance necessary to cover losses in the insurance industry, he said.
Still, the industry should be able to make a recovery.
"I think they'll be all right," Hunter said. "Even after Hurricane Andrew, which was $15 billion in reported losses, only 8 companies had financial difficulties and all claims were paid. The industry bounced back."
Munich Re, the world's largest reinsurance company, said it expects "considerable" damage claims from the terror attacks on New York and Washington, according to the Financial Times.
Shares of Munich Re plummeted 16 percent to 230.49 euros Tuesday. Allianz, one of the biggest non-life insurers, dropped 14 percent to 227 euros.
Tuesday's tragedy likely will reshape the way policies are set up, Miller said. "This will throw a whole new set of issues at risk managers."
Said Miller: "An event like today's is going to cause us to rethink a lot of things in this country, whether it's financial markets or airport security. But how that plays out is anyone's guess." |
