Global Reinsurance has revisited the WTC-related losses one year after the market's largest catastrophe to date.
In October last year, Global Reinsurance took a snapshot of the international re/insurance market's exposure to the events of September 11. At that point in time, the loss estimate, according to our figures culled from company statements, was reaching around $19bn, though the very nature of the industry and the event itself made it clear that this would not be an accurate indicator of the final amount to be paid out by the industry.
One year on and, unsurprisingly, the estimate has risen over a third to around $26bn. Nevertheless, there are still many issues to settle before a true picture of the final bill will emerge. Not least, the litigation between Larry Silverstein, the US property developer who took over the World Trade Center lease less than two months before the attack, and insurers led by Swiss Re subsidiary SR International Business Insurance Co Ltd, will eventually clarify the level of the property loss.
Currently, the Silverstein Group is claiming the attack on the World Trade Center constituted two events, not one, under the policy. If Mr Silverstein's contention holds in the courts, the insurers' payout could double from about $3.5bn to more than $7bn - and it is the lower figure that generally is included in the table on the following few pages.
Swiss Re is hotly contesting Mr Silverstein's contention. In a recent statement, it said, "there are no circumstances under which World Trade Center leaseholder Larry Silverstein can ever recover more than $3.5bn of insurance proceeds under the coverage he purchased. Swiss Re's experts have established the true value of Silverstein's claim in the range of $2.4bn, an amount consistent with Silverstein's internal calculations. Swiss Re reports that Pearson Partners, an independent real estate appraiser has estimated the actual cash value of the WTC complex at $2.156bn under the Willis Property form (Wilprop) that Silverstein used to bind insurance coverage." Even so, part of Mr Silverstein's contention is that the group of insurers led by Swiss Re had agreed to a Travelers wording that does not include a definition of occurrence.
Towards the beginning of this year, XL and ACE are believed to have settled with Mr Silverstein for $298m and $67m respectively, under the Wilprop wording. That settlement is understood to have concluded because Mr Silverstein accepted that the two insurers based their coverage on different documents to the other 20 or so involved with the WTC policy. According to sources, the ACE and XL covers were based on a definition of `occurrence' including a `series of similar causes'. This does not appear to be the case with the remaining litigants, who are vociferously contesting not just the level of claim asserted by Mr Silverstein, but the way in which he is making those assertions. In early August, Jacques Dubois, Chairman and CEO of Swiss Re America Holding Co, said: "Silverstein's most recent attempt to recreate the coverage limit he purchased is just more of the same nonsense and should be dismissed out of hand. When seeking the insurance coverage in 2001, Silverstein told us that the value of the property, including business interruption insurance, was $5bn, but he refused to pay the price for that amount and bought only $3.5bn of coverage."
Swiss Re's attorney, Barry Ostrager of Simpson Thatcher, criticised Mr Silverstein's use of the media to further his case. In particular, a recent spat over advertising raised Mr Ostrager's heckles. "This new media initiative has less to do with advertising itself and more to do with the shambles in which Silverstein finds his own case," he said. "Perhaps seizing on irrelevancies that play on emotional aspects of this dispute is how Silverstein desperately hopes to resurrect his case at trial. Silverstein may believe that if you cynically repeat misinformation long enough, people will believe it."
As the battle for the billions rolls on, the battle over what will happen to the 16-acre site in New York is also continuing. Still there is disagreement about whether the site should be a rebuilt version of the original buildings - though this proposition does seem to be waning in favour - or should be extended to include a memorial and social buildings, such as housing and a cultural centre. New York's mayor, Michael Bloomberg, has offered the site's owners, the Port Authority of New York and New Jersey, a different area of land in return for the WTC site, though Mr Silverstein's involvement in it is unclear. Mr Silverstein has publicly declared that he has a "public trust" to rebuild the site with the proceeds of the insurance claim. In a recent interview, he said, "This will be a legacy to my children and grandchildren, and my most ardent desire is that they will look back on this with an intensity of pride."
The Global Reinsurance list of re/insurers with an exposure to the events of September 11th
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American attack losses part 2
part 2 part 3 part 4 (including Lloyds (net))