New York Governor Eliot Spitzer personally entered negotiationsand helped close a deal between the World Trade Center'sleaseholder and seven insurers on a $2 billion settlement of allremaining claims arising from the Sept. 11, 2001 destruction of thetwin towers by terrorists. The agreement between SilversteinProperties and the carriers was described by Gov. Spitzer andInsurance Superintendent Eric R. Dinallo as the largest settlementin regulatory history.

Their announcement–made in the New York Insurance Department'sNeil D. Levin Hearing Room in Manhattan–was symbolic, the governornoted, because the room was named in honor of the former insurancesuperintendent who lost his life in the Sept. 11 attack. The roomwas packed with city, state, Port Authority officials and insuranceexecutives.

The agreements made last week settle all outstanding court casesand related proceedings involving World Trade Center claims,officials said. This concludes nearly six years of legal conflictand removes the last major obstacle to development at the GroundZero WTC site.

According to the governor and superintendent, resolution of theclaims means that Silverstein Properties and the New York and NewJersey Port Authority that share the site can now obtain financingand forge ahead with a rapid construction schedule.

The insurance companies involved in the settlement are AllianzGlobal Risks US Insurance Company, Employers Insurance Company ofWausau, Industrial Risk Insurers (now owned by Swiss ReinsuranceCompany), Royal Indemnity Company, Swiss Reinsurance Company,Travelers Companies Inc. and Zurich American Insurance Company.

Pierre Ozendo, chief executive officer of Swiss Re America;Andreas Shell, claims crisis coordinator of Allianz Group; and KenSpenze, general counsel of Travelers, were on hand to personallypraise the settlement.

The governor called the agreement that he and Mr. Dinallo helpednegotiate a reflection of his administration's commitment to WorldTrade Center redevelopment as a top priority.

He said resolution of these claims would permit the rebuildingto go ahead with certainty and allow the World Trade Center to onceagain be “a symbol of New York's global commercial leadership.”

Silverstein Properties Inc. leased the World Trade Center fromthe Port Authority in July 2001. When terrorists destroyed the twintowers on Sept. 11, 2001, paperwork on the insurance policies forthe Trade Center had not been completed.

Suits were filed in October 2001 to resolve disputes over howmuch the insurance companies owed and whether one or two separateinsurable events were involved.

The courts eventually determined that the most SilversteinProperties could collect from the insurers in the suits was $4.68billion. Until now, the insurance companies had paid more than halfof that total, leaving the remaining sum in dispute.

State officials said that in late March, Mr. Dinallo beganholding dozens of meetings with Silverstein Properties and theinsurance companies to resolve the stalemate.

“This had to come to an end. It was hurting the publicconfidence in government and the insurance industry,” Mr. Dinallosaid during last week's settlement announcement.

“We are very happy to reach this resolution and see that thisscar left by the terror attack will finally be healed,” said Mr.Shell of Allianz.

This month, with several outstanding issues remainingunresolved, Gov. Spitzer decided to become personally engaged inthe settlement negotiations.

He described the process that took place as “two hockey teamswho have just finished a very hard series. At the end of the seriesthey shake hands. We have been to a very tough hockey game andthere have been tussles, there have been disagreements…but I wantto say that everyone here has played in good faith and diligence toget to where we have today.”

This might not be the end of WTC-related coverage disputes,however. The day following the agreement, Paris-based reinsurerSCOR announced it would seek arbitration over its share of itsreinsurance contract with Allianz, saying the settlement “does notrespect the terms and conditions” of its reinsurance contract.

“SCOR has already informed Allianz that this settlement exceedsthe contractual requirements and contains exgratia elements,” thecompany said in a statement, indicating it felt the settlementpayment was made voluntarily, and not out of any legal obligationunder its contract.

Terms of the settlement were not disclosed. Indeed, as part ofthe agreement, Silverstein Properties and the insurance companiessigned confidentiality agreements requiring that specific amountspaid by each company not be made public.

However, a clue about the individual company liabilities couldbe that during the trials in 2004 to determine if insurer contractswould have to pay for one or two events in the Sept. 11 attack, itwas revealed that Swiss Re had the largest stake (includingIndustrial Risk) at $1.11 billion.

Of the other companies in last week's settlement, Allianz had anexposure of $433 million. Travelers (including Gulf Insurance,which it acquired) faced a total of $276 million in exposure.

Royal Indemnity anticipated a $128 million maximum loss, whileWausau's potential liability was $65 million, and Zurich American'swas $46 million.

All those estimates together would total just over the $2billion announced in last week's settlement.

Overall, this latest settlement would bring total 9/11-relatedinsured losses to nearly $37 billion, according to the InsuranceInformation Institute, which reported that up until last week'sdeal, the insurance industry as a whole had paid, in 2006 dollars,$35.9 billion in claims for terrorist attacks in New York,Washington, D.C., and Pennsylvania. (See accompanying pie chart forthe coverage breakdown.)

Silverstein Properties and the Port Authority reached a globalagreement last September for comprehensively rebuilding the WorldTrade Center site. The agreement called for the Port Authority toconstruct Towers 1 and 5, and for Silverstein Properties toconstruct Towers 2, 3 and 4 along the eastern portion of thesite.

The arrangement called for the Port Authority to prepare the“East Bathtub” foundation for construction of those towers.

To help finance this rebuilding, Silverstein Properties and thePort Authority agreed to a split of the remaining insuranceproceeds of approximately 56 percent to Silverstein and 44 percentto Port Authority.

Larry Silverstein, the World Trade Center leaseholder anddeveloper, said that with the settlement, building can now go aheadwith certainty and be completed on schedule.

In announcing the settlement, it was noted that the two sideshave spent hundreds of millions of dollars on legal fees and othercourt-related costs. The authorities said the agreements will saveadditional tens of millions in further legal costs.

The governor and Mr. Dinallo had words of praise for a number ofofficials they said had been integral in helping reach anagreement, including New York's Democratic U.S. Senators ChuckSchumer and Hillary Clinton, Democratic Assembly Speaker SheldonSilver, Rep. Anthony Weiner, D-N.Y., New York City Mayor MichaelBloomberg and others.

Mr. Dinallo added that “this is government at its best, workingwith industry to solve a problem, rather than using the courts orfines or other adversarial procedures. This case highlights theessential role that insurance plays in modern society.”

Mr. Silverstein said that “Gov. Spitzer and SuperintendentDinallo deserve huge credit for recognizing the importance ofsettling all outstanding insurance issues, and their tireless workmade sure we got it done.”