S&P Comments on Impact of 9/11 Ruling on Insurers

September 30, 2003

Standard & Poor’s has issued a bulletin commenting on the recent ruling in favor of Swiss Re and other insurance companies in the case involving claims to be paid for the destruction of the World Trade Center (See IJ Website Sept. 29).

S&P called the ruling, which it said “deemed the World Trade Center attacks to be a single event for insurance purposes,” as “good news for insurers on the heels some bad news: an earlier ruling allowing lawsuits to proceed against the Port Authority of New York and New Jersey and the airlines.”

It should be noted that the decision of the Court of Appeals upheld a previous ruling by the trial court denying a motion for summary judgment. It left the ultimate decision as to whether the WTC attacks constituted one or two “occurences” up to a trial jury.

S&P had previously noted in a report published on Sept. 25, 2003, that “despite the twists and turns of the legal process, insurance companies’ reserves have held fast.” According to the report, the projected insured losses “arising from the catastrophe–$35 billion–are the worst the industry has ever sustained. However, they are far less than the $50 billion that Standard & Poor’s had said–shortly after the attack–that the (re)insurance industry would have to incur to threaten insolvencies.”

Steve Dreyer, an S&P credit analyst in New York, noted that “the sector has actually seen profitability improve, as pricing and underwriting practices have firmed up in the two years since Sept. 11, 2001. We’ve seen more profits driven by firmer pricing, and accident year underwriting results are finally moving towards respectable levels of profitability.”

S&P’s bulletin went on to indicate that 11 out of 18 insurance companies that it had put on “CreditWatch negative” after the attacks and 14 of the world’s 20 largest reinsurers “are rated lower than they had been on Sept. 11, 2001.” However, the rating agency stressed, “the difficulties adversely affecting the credit quality of these companies were only partially related to the disaster.” Dreyer added, “the industry still has yet to fully recover from issues before Sept. 11.”

S&P said the Sept. 25 article, entitled “Insurer Sept. 11 Reserves Unaffected by Recent Ruling,” can be found on RatingsDirect, its Web-based credit analysis system, at www.ratingsdirect.com.

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