Terrorist Acts Strike New York and Washington

September 11, 2001

Terrorists crashed two hijacked planes into the World Trade Center this morning, causing countless deaths and untold damage as the twin 110-story towers collapsed. The crashes occurred minutes apart just before 9 a.m., and were followed soon after by a commercial airliner exploding into part of the Pentagon.

According to news reports, authorities are now trying to evacuate the 50,000 people who work in the twin towers, but many are thought to be trapped and the toll of human lives is already estimated in the thousands.

Several insurance trade associations are headquartered in the area, including the National Association of Independent Insurers (NAII) which has three member companies headquartered in the World Trade Center: Scor Reinsurance, Partner Reinsurance, and General Security Insurance Company and Indemnity Co., a subsidiary of Scor U.S. Group.

“I’m looking at the list of our New York members in Manhattan and it is large-there are many insurance companies and many reinsurers located there as well,” said Joanne Orfanos, NAII senior vice president public affairs in Chicago. “We have had no contact with them-we are concerned about them. Our role is always to get information out to our members, but it’s a little different having our members involved.”

Reaction to the events was immediate and serious across the country, as cities bunkered down under heightened security. All air traffic was halted, trading on Wall Street was suspended, and many businesses were closed. In Chicago, Orfanos said, “they have evacuated our loop, the Sears Tower, the Board of Trade, the airport, all the downtown businesses, some colleges, institutions-the fear factor is there.”

Insurance ramifications

The damage estimate is still much too early to call, but the event will no doubt have horrifying effects on the property/casualty industry. “They are saying the [World Trade Center] buildings would be self-insured for a certain limit, but $25 million may be the trigger for it to be deemed a catastrophe,” Orfanos said. “The industry sets up a mechanism to track claims associated with that event. They assign a cat number to it and all claims relate to that number.”

According to the NAII, the insurance ramifications of the disaster include:

Property and liability losses sustained by the insurers and reinsurers of the airlines

Property and liability losses sustained by the insurers and reinsurers of the World Trade Center and other surrounding buildings

Workers’ compensation coverage for injuries sustained by workers in the World Trade Center, the Pentagon and other surrounding buildings

Auto insurance losses for cars damaged by falling debris and those destroyed in underground parking garages

Business interruption losses sustained by the insurers of the businesses in the World Trade Center and surrounding buildings

Property losses for computers, furniture and other contents sustained by the insurers of the businesses in the World Trade Center and surrounding buildings

Contingent business interruption insurance for the general “interruption of commerce” these acts caused other businesses

Potential liability exposure for the insurers of the World Trade Center and surrounding buildings for not promptly evacuating all employees.

Other affected coverages include life insurance, AD&D and travel accident.

The NAII said is currently working with loss and claims professionals among its member companies and others in the insurance and reinsurance industries to develop an accurate assessment of the insured losses. However, because of the nature of this terrorist act it is likely that law enforcement officials will conduct an extensive investigation and will limit the access of insurers to thoroughly assess the damage. As such, it may take weeks before a definitive financial analysis is available.

Associations call off conventions
The National Association of Professional Surplus Lines Offices cancelled its Annual Convention in San Antonio, Texas, due to the conditions created by the attack on the World Trade Center and other buildings.

In its announcement, NAPSLO stated that all hotel reservations for convention registrants will be cancelled. “We express our deepest sympathies to all those who are affected by this tragic act of terrorism,” NAPSLO stated.

The National Association of Mutual Insurance Companies (NAMIC) Board of Directors will be holding an emergency meeting on Wednesday to decide whether to proceed with the Association’s 106th annual convention, which was scheduled to begin Sept. 21 in Washington, D.C. If the convention is cancelled, members will be notified immediately.

Meanwhile, the staff of the Association’s D.C. office is reported safe as the Pentagon, the scene of a terrorist attack, is several miles from the NAMIC office. Most of the D.C. staff have gone home for the day.

NAMIC issued the following statement from Larry Forrester, NAMIC President: “Our focus is on the devastating loss of life, and of concern for NAMIC’s members and their insureds during this disaster. Our thoughts and prayers are with the victims and their loved ones at this time of national tragedy. Insurance issues will be evaluated during the coming days, but today should be reserved for mourning the great losses and doing whatever can be done to protect our citizens from further devastation.”

LIMRA International announced it would be canceling its conferences scheduled to take place Sept. 12-14 in Chicago. “The safety of our members and other conference participants is paramount,” said Richard A. Wecker, president and CEO. “We are very grateful for the support of our members, speakers and other participants and deeply regret having to cancel these events. But this is a time of national tragedy and disruption that calls for this action.”

Experts are still speculating on the mind behind the coordinated attack, but the name Osama bin Laden is at the top of the list. President Bush has ordered a full-scale investigation to find the perpetrators. “Today we’ve had a national tragedy,” Bush stated this morning in Sarasota, Fla. “Two airplanes have crashed into the World Trade Center in an apparent terrorist attack on our country…We will do whatever is necessary to protect America and Americans. The resolve of our great nation is being tested.” Bush was scheduled to return to Washington, but due to security reasons, the flight was diverted.

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