News

ATTACK ON AMERICA

September 2001

Our thoughts and prayers are with the thousands of families who have lost loved ones in the attack on our country Tuesday, September 11th.  This disaster has affected us all with an emotional toll that is immeasurable.

Estimates of the financial losses range from $25 - $30 billion and more.  We are only beginning to feel the effects on the insurance industry.  According to Business Insurance, individual insurers and reinsurers have issued estimates of the losses they are likely to face:

• Citigroup Inc. expects to see aftertax losses of up to $500 million, including life insurance claims.
• Hartford Financial Services Group Inc. estimates after-tax losses of $450 million net of reinsurance, including about $30 million related to claims against Hartford Life.
• Liberty Mutual Insurance Co. expects to sustain $200 million to $300 million in net aftertax losses stemming from several types of claims, including life and personal lines.
• Transatlantic Holdings Inc. projects aftertax losses of up to $100 million.
• Aon Corp.’s Combined Insurance Co. operation could face pretax losses of $50 million to $55 million for life insurance covering Aon employees in the World Trade Center.
• Reinsurer PMA Capital Corp. estimates pretax losses of $30 million.
• Aetna Inc. expects losses of $10 million to $15 million on its group life business.
• Conseco Inc. projects its losses from participation in catastrophic reinsurance pools to be less than $5 million.

Prior to this act of terror, we had been experiencing a significant change in the insurance marketplace.  Premiums were on the rise, and underwriters were re-evaluating the adequacy of rates (see our article entitled “Hardening Market”).

In the aftermath of the attack, we have seen at least one insurer decline to write any new business in the “New York City” area.  We received reports that a large property insurer will not be renewing policies with an October 1 anniversary date (due to its loss of reinsurance).  We are told that a major national broker may not consider competing on new business at this time.

We fully expect the problem to worsen.  We have already experienced larger than anticipated rate increases, reduced umbrella capacity and therefore, our number one priority at this time will be to maintain continuity of coverage and minimize cost increases.

Stockbridge Risk Management, Inc.
40 Cutter Mill Road, Great Neck, NY 11021-3213
Phone: 516-487-1700