The long-term implications of the September 11 terrorist attacks for the insurance industry “will likely be far greater than the ultimate sum of the paid losses,” said Larry Mayewski, A.M. Best Co.’s Executive Vice President and Chief Rating Officer. “They will also dramatically change how the industry conducts business in the future.” In an Oct. 2 conference call with hundreds of participants, Mr. Mayewski called the terrorist attacks of Sept. 11 “unprecedented” in scope and complexity. . . . The direct and indirect impact of this event may not be fully understood for several years,” he said.
“The insurance industry will be able to meet its commitments,” said Mr. Mayewski, noting that A.M. Best’s most recent estimate of losses stemming from the attacks remains in excess of $30 billion.
Comments were provided on how the industry might change its business practices in the wake of the terrorist attacks.
A.M. Best expects to see a general flight to quality; a furthering of market concentration through consolidation; an increased need for capacity as companies take a new view of exposures and risk management; and acceleration of rate hardening in many lines of business.
In addition, A.M. Best anticipates changes to program terms and conditions in both the primary and reinsurance markets; the entry of new, specialty-focused capital; the potential for “new generation” capital-market products; and the possibility of government support or intervention of some kind.
The full transcript of the conference call can be accessed at: http://www.ambest.com/ratings/teleconference.pdf.
A.M. Best will be providing continuing updates to the state of the industry and any rating implications that develop.
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