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08/10/2001
Lloyd’s gross insurance exposure may run to £7bn
The latest figures available estimate that the London Insurance markets may be facing £7 billion ($10 billion) in gross liabilities as a result of the terrorist attacks on the US.
According to rating agency Fitch, the net loss as reported by Lloyd’s was £1.3 billion, but the final net figure may be closer to £1.7 billion.
Fitch cited figures from the Northridge Earthquake in 1994, which indicated that final gross costs arising from such incidents were usually underestimated.
Initial estimates one month after the incident put the Northridge losses at $2.5 billion, but the final figure was closer to $12.5 billion – five times higher than the initial estimate.
Fitch warned that given the magnitude of the World Trade Centre loss, the bulk of which would be borne by re-insurers, insolvencies could not be ruled out. According to Fitch, because Lloyd’s must hold 100 per cent of gross claims for US reinsurance business in trust, Lloyd’s itself mach face liquidity problems. However, this was denied by Lloyds who are understood to hold in excess of £4 billion in a reinsurance trust fund.
Lloyd’s recently increased its insurance premium levy imposed on its underwriting syndicates. This fund is used to pay claims should syndicates be unable to meet their liabilities.
The WTC attack resulted on the largest single day insurance loss in Lloyds 300-year history. (SP)
According to rating agency Fitch, the net loss as reported by Lloyd’s was £1.3 billion, but the final net figure may be closer to £1.7 billion.
Fitch cited figures from the Northridge Earthquake in 1994, which indicated that final gross costs arising from such incidents were usually underestimated.
Initial estimates one month after the incident put the Northridge losses at $2.5 billion, but the final figure was closer to $12.5 billion – five times higher than the initial estimate.
Fitch warned that given the magnitude of the World Trade Centre loss, the bulk of which would be borne by re-insurers, insolvencies could not be ruled out. According to Fitch, because Lloyd’s must hold 100 per cent of gross claims for US reinsurance business in trust, Lloyd’s itself mach face liquidity problems. However, this was denied by Lloyds who are understood to hold in excess of £4 billion in a reinsurance trust fund.
Lloyd’s recently increased its insurance premium levy imposed on its underwriting syndicates. This fund is used to pay claims should syndicates be unable to meet their liabilities.
The WTC attack resulted on the largest single day insurance loss in Lloyds 300-year history. (SP)
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