A.M. Best Expects Industry Losses to Exceed

September 24, 2001

Billion Although it is still too early to predict the financial impact of Sept. 11’s tragic events, A.M. Best Company stated last week that insurance industry losses are likely to exceed $30 billion, making this the costliest catastrophic event in history.

A.M. Best said that the nature and location of the tragedy dictate that the majority of the losses will ultimately fall on the largest commercial carriers, their reinsurers and the London market. The segments most affected will be property, aviation, business interruption, workers’ compensation, commercial liability and life insurance.

However, the company stated that it believes the U.S. and international insurance companies, although challenged by this event, will be able to meet their commitments despite the projected magnitude of the potential losses.

A number of factors contribute to the uncertainty of any projections made at this time. The ultimate determination of insurable losses involves legal definitions of whether this was a single event or multiple events and whether there are any exclusions for acts of terrorism. In addition, the complexity and scope of the events could give rise to claims not yet anticipated. While underwriting risk may be concentrated with leading commercial carriers and their reinsurers, the impact of these terrorist acts on the financial markets is yet another issue that will affect the ultimate financial impact.

The greatest share of the property and commercial insured claims will be borne by the largest commercial insurers and reinsurers, both domestic and international. While this event will be costly to those companies, A.M. Best expects that the majority of these large insurance organizations will be able to fulfill their obligations without compromising their financial strength. A.M. Best will monitor the impact of this event on all rated organizations.

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