WTC Trial No Rating Factor, S&P Says

Even if a jury decides in favor of World Trade Center leaseholder Larry Silverstein, costing insurers an additional $3.5 billion in claims for the Sept. 11 attack, it wont become a ratings factor, according to Standard & Poors.

Steven Dreyer, managing director for S&Ps Insurance Ratings Services in New York, said that even “under the worst-case scenario,” if insurers lose their legal battle, “although the amount is obviously significant, the loss is well spread across the insurance industry.”

Indeed, Mr. Dreyer noted that the WTC insurance program consisted of a primary and 11 excess layers, with over 20 insurers and Lloyd's syndicates participating. “Therefore, a verdict against the insurers is not, in itself, a trigger for further downgrades,” he said.

S&P said its rating concerns are also diluted by the lawsuit's duration, pointing out that the jury trial that began last week is part of a protracted legal process that has taken more than two years.

Additionally, whether the WTC event is deemed to be one event or two, it will be “a relatively small part of the overall liability picture spawned by Sept. 11, 2001,” said S&P, which noted that the limited number of families eligible to pursue claims for WTC-related losses is “a positive for the insurance industry.”

“Although the payouts from the WTC attack are significant, the insurance industry has learned how to employ better modeling techniques and to spread risk more efficiently. This case proves that point,” Mr. Dreyer said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 20, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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WTC Trial No Rating Factor, S&P Says

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