Stand by for the biggest payout of all

By KATHERINE GRIFFITHS

As insurance experts began to assess the scale of the devastation caused by the attack on the World Trade Center and the Pentagon, the estimate for the total bill soared to $92 billion.

If it does reach this level, it would be the largest bill the insurance industry has ever faced.

The most expensive incident before this week's atrocity was Hurricane Andrew in 1992, which hit the east coast of the US and cost the equivalent in today's money of about $44.7 billion.

The new estimate was cited by HSBC.

The bank issued a gloomy note for clients, warning that "losses will almost certainly be spread far and wide".

The largest area of claims is expected to be on life assurance polices on the as yet unknown number of dead.

Payouts relating to the destruction of the towers and aeroplanes are also expected to figure heavily.

HSBC and other analysts dismissed the notion that the financial hit might be reduced because the damage was caused by a terrorist attack.

One said: "Places like the World Trade Center and airlines are exactly the people who will have taken out insurance against terrorism, either under specific terrorist or war insurance."

Of the many insurance companies that will bear the costs, a certain candidate is the American company Chubb, which is understood to be the main insurer of the twin towers.

The company is believed to be preparing already to pay out up to $484 million in losses, and has reinsurance to cover further liabilities. Reinsurance companies are likely to end up bearing around two-thirds of the cost.

Munich Re, the largest reinsurance company in the world, gave an early estimate of costs of $2.4 billion while Swiss Re, the number two in the market, said that at the moment, claims would be in the region of $1.6 billion.

Of general insurers, Allianz estimated a loss of up to $1.5 billion, while Zurich Financial Services Group said the financial impact would be a $920 million pre-tax loss.

Lloyd's of London is also expected to be severely hit because it specialises in aviation insurance and in covering terrorist attacks.

Lloyd's was trying to assess the damage and requested all of its underwriters to hand in their estimates by noon yesterday.

But the organisation has, so far, refused to give an indication of potential losses.

Its chairman, Sax Riley, said: "The situation in New York and Washington is evolving continually.

"The global social and economic effects are only just starting to be felt. Any calculation of the total losses so soon after the event can only be deeply flawed."

Analysts believe the total bill for Lloyd's could be in the same region as the $1.1 billion it was forced to pay out when the Word Trade Center was bombed in 1993.

Many industry figures expected that most of the cost of the destruction would be borne by the giant American insurance companies, which include AIG, which enlarged itself recently when it bought American General.

AIG said it could not yet estimate its liabilities.

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