Carriers' decision to end six years of litigation and rancor and settle claims by the developer of the World Trade Center is a positive move for insurers, removing a major thorn in the industry's side, industry experts said.

Seven carriers agreed Wednesday to pay $2 billion to settle outstanding claims over the World Trade Center attack of 9-11 after New York State officials stepped in to mediate an agreement.

“I think that all the parities are happy to put this behind them,” said Robert P. Hartwig, president and chief economist for New York-based Insurance Information Institute. “Obviously, the cost and uncertainty associated with litigation works to nobody's benefit.”

Noting that total payout of claims by the industry from the 9-11 attack stands at an estimated $37 billion, he said the settlement was within the range of what insurers expected, based on the 2004 court decision. The settlement amount should be within insurers' reserves, he said, meaning little impact on 2007 earnings.

Mr. Hartwig said he expects no adverse reaction from investors and the industry is financially strong today.

He added that one of the lessons from the Trade Center dispute is the need for separate terrorism coverage under the Terrorism Risk Insurance Act and elimination of ambiguities in contract language that led to the litigation in the first place.

“It's good for the industry to get this done and over with,” said Donald Light, an insurance consultant with Boston-based Celent. “Insurers had some good legal grounds [to pursue], but from a public relations standpoint it was not a good sequence of events.”

The dispute over funds had threatened reconstruction efforts at the site and the building of the Freedom Tower highrise.

Randy J. Maniloff, an attorney for the law firm White & Williams in Philadelphia, which represents insurers, said the Trade Center dispute resembled the legal disputes that arose from Hurricane Katrina.

“This is another example of insurers being a big target for these kinds of situations,” he said. “There is a lot of pressure put on them to ignore their right to litigate a dispute when things like this happen.”

He added that it would not have been surprising to see litigation drag on for another six years in this case if a settlement had not been reached.

Ann W. Spragens, senior vice president, secretary and general counsel for the Des Plaines, Ill.-based Property Casualty Insurers Association of America (PCI) insurers trade group, said in an e-mail: “It's good for insurers to be seen agreeing to pay claims because it is too easy to demonize the industry as having no soul, when legally we have to raise questions about whether there is coverage.”

She said such characterization of the industry is “too common a theme in current public discourse and it simply isn't the truth.”

As for public officials stepping in to reach a settlement, she said they “can help facilitate such a resolution.” She noted that Mississippi Insurance Commissioner George Dale facilitated the resolution of homeowners' claims from Hurricane Katrina in his state.

She added that yesterday's settlement “may help remind both industry and government officials that there is a positive role that can be played in commercial lines situations, too, so it sets a good example from that perspective.”

Meanwhile, in another dispute situation, Paris-based reinsurer SCOR said it would seek arbitration over its share of its reinsurance contract with Allianz, one of the carriers named in the settlement, saying the settlement “does not respect the terms and conditions” of its reinsurance contract.

A spokeswoman for Allianz said the company could not comment on its reinsurance contracts. Several observers, however, said SCOR's decision would have no bearing on the payment.

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WTC Settlement Called Good Move For Industry

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