Swiss Re, which faces one of the largest loss exposures from the destruction of the World Trade Center, an estimated $1.25 billion, made a commitment to an advance payment of the claims, but at the same time asked the U.S. Federal Court in Manhattan to declare that the event was one single loss.
While showing evident good faith in offering to advance initial payments to those covered by its policies who have suffered the most serious losses, including the Port Authority of NY and NJ, who owned the buildings, Swiss Re nonetheless put the rather substantial question of coverage before a court whose decision will have very significant consequences for the industry.
Its request for a declaratory judgment asks that the event be considered as one loss, rather than two, even though two planes destroyed two buildings. The immediate decision will determine whether Swiss Re and the other insurers involved owe $3.5 billion, the insured loss amount for one building, or for two separate losses. The court’s decision would also set a precedent for future claims.
The action puts Swiss Re squarely at odds with Silverstein Properties, who acquired the master lease on the WTC complex in July. Larry Silverstein has affirmed that his company considers the destruction of the twin towers to be two separate loss events. He issued a statement strongly disagreeing with Swiss Re’s one loss assertion.
In an unrelated move Swiss Re reaffirmed its intention to raise approximately $2.9 billion through a public sale of its shares and a bond issue, principally to fund its purchase of Lincoln National’s reinsurance operations. The public offering had been put in doubt after the events of September 11th sharply depressed insurance company share prices.
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