WTC Trial No Rating Factor, S&P Says

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

Steven Dreyer, managing director for S&Ps Insurance RatingsServices in New York, said that even “under the worst-casescenario,” if insurers lose their legal battle, “although theamount is obviously significant, the loss is well spread across theinsurance industry.”

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

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

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

“Although the payouts from the WTC attack are significant, theinsurance industry has learned how to employ better modelingtechniques and to spread risk more efficiently. This case provesthat 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 serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.