NEW YORK (CNNfn) - Lloyd's of London cautioned Wednesday that estimates of insurance costs from the terrorist attack on U.S. buildings Tuesday are "deeply flawed."|
Lloyd's, the world's biggest and oldest insurance market, said that any approximation of the absolute costs is highly speculative and unwise.
"The situation in New York and Washington is evolving continually," Lloyd's Chairman Saxon Riley said in a statement Wednesday. "The global social and economic effects are only just starting to be felt. Any calculation of the total losses so soon after the event can only be deeply flawed."
Lloyds had said Tuesday it would issue an assessment of the impact on the market within 48 hours. Lloyd's on Wednesday said it will not release any aggregate loss figures until it has more detailed information.
Insurance claims stemming from the terrorist attack on New York's World Trade Center likely will reach into the billions of dollars. The attack will surpass the $775 million in claims caused by the 1992 Los Angeles riots, which ranked as the most costly man-made U.S. disaster to date, the New York-based Insurance Information Institute said.
"[The trade center attack] is the mostly costly man-made catastrophe in U.S. history and possibly world history," said Insurance Information spokeswoman Caroline Gorman. "This will definitely outdo the L.A. riots."
Whether the WTC attack is on par with the insurance losses incurred by the top natural disasters is unclear. Hurricane Andrew, which hit in 1992, is the worst disaster ever, with insurance losses totaling $19 billion, Gorman said.
Claims from the 1993 Northridge, Calif., earthquake totaled $14.1 billion while typhoon "Mireilly" which struck Japan in 1991, caused losses of $6.9 billion, Gorman said.
"We will all know in a few days what the losses will be," she said of the World Trade Center attack.
Losses up to $15 billion?
Credit rating agency Moody's reportedly pegged the insurance costs of the WTC destruction at $10 billion to $15 billion. However, a Moody's spokesman could not confirm that figure Wednesday.
Zurich, Switzerland-based Swiss Re also cautioned that it is too early to provide accurate information about the devastation. However, based on a very rough estimate, the loss to Swiss Re will be in the range of "the 1999 European winter storms, Lothar and Martin," the insurer said.
Lothar and Martin cost insurers a total of nearly $8 billion in 1999, according to data from the Insurance Information Institute. However, Swiss Re's share of the losses amounted to $723 million (1.2 billion Swiss francs), a company spokesman said.
Munich Re, the world's largest reinsurer, said it may incur insurance costs of up to $906 million (1 billion) and the losses will significantly impact profit for 2001. However, the losses will not affect Munich Re's solidity, the insurer said.
"While we of course expect to incur losses resulting from insurance claims, it is far too early to estimate their magnitude," AIG Chairman Maurice Greenberg said in a statement.
Losses stemming from the attack will not impact New York-based AIG's (AIG: unchanged at $74.26, Research, Estimates) financial condition, Greenberg said.
Coverage and blame
Damage due to fire, explosion, smoke is generally covered by property insurance policies, Gorman, of the Insurance Information Institute, said.
Insurers generally do not cover damage from war and some commercial policies may also not cover damage from terrorist's attacks. But such "exclusions" are generally limited to European insurers.
"Some European insurance companies do not cover terrorism but [we] do not know of any U.S. based carriers that do not cover," Gorman said.
Spokesman for Swiss Re and AIG declined to comment on exclusions.
Whether the WTC attack will cause more insurers to limit their coverage and exclude terrorists acts is unknown. But most buildings will not have to worry about "exclusions," since terrorists usually lash out at structures that are symbols, like the Statute of Liberty or the World Trade Center, Gorman said.
But victims of the attack, both in the air and on the ground, and their families will be looking for someone to hold accountable.
"I hate to say it but some may seek to the blame the airlines and airports," said attorney Reed Kathrein, a litigator with law firm Milberg Weiss Bershad Hynes & Lerach.
Airlines and airports may be faulted for not taking proper precautions and litigation could spread from the airports/airlines to insurance coverage of buildings.
"Milberg Weiss is not looking at this at all and I don't think people should be out there trying to sign up clients today," Kathrein said. "We've got a lot of other things we have to think about now."