Although UK insurers have so far weathered the losses from the Sept. 11 attacks, some may still face the threat of financial failure and ultimately liquidation, according to an article in London’s Financial Times.
The FT interviewed two accountants from PricewaterhouseCoopers, who are serving as liquidators for Independent Insurance, which collapsed last June, and Chester Street, a runoff vehicle for employers’ liability claims, primarily related to asbestos, which failed a year ago.
Their conclusions were that, although there have been as yet no failures of British insurers due to the events of Sept. 11, there’s a big discrepancy between what many of them have estimated as their individual losses, and what the overall loss estimates are. This indicates to the accountants that many estimates may be too low, or are exaggerating the reinsurance recoveries the primary insurers expect to receive.
According to their figures some 200 insurance companies are currently in runoff, and a number of others have ceased writing some classes of business. 38 companies are actually going through a restructuring or liquidation process.
In addition they noted that an anticipated “flight to quality” could have adverse effects on smaller less strongly capitalized companies. They warned that in these circumstances more failures and restructurings could be anticipated.
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