The decision by seven carriers to end six years of litigationand rancor and settle claims by the developer of the World TradeCenter site's reconstruction is a positive move for insurers,removing a major public relations thorn in the industry's side,insurance leaders say.

The seven carriers–Allianz Global Risks US Insurance Company,Employers Insurance Company of Wausau, Industrial Risk Insurers(now owned by Swiss Reinsurance Company), Royal Indemnity Company,Swiss Reinsurance Company, Travelers Companies Inc. and ZurichAmerican Insurance Company–recently agreed to pay $2 billion tosettle outstanding claims over the WTC's destruction by terroristson Sept. 11, 2001.

The settlement came after New York state officials–includingGov. Eliot Spitzer and Insurance Superintendent Eric R.Dinallo–stepped in to personally mediate an agreement.

“I think that all the parities are happy to put this behindthem,” said Robert P. Hartwig, president and chief economist forthe New York-based Insurance Information Institute. “Obviously, thecost and uncertainty associated with litigation works to nobody'sbenefit.”

Noting that the total payout of claims by the industry from the9/11 attack with this latest settlement stands at about $38 billion(in 2006 dollars), Mr. Hartwig said the settlement was within therange of what insurers expected, based on a 2004 court decisionabout their respective liabilities.

The settlement amount should be within insurers' reserves,according to Mr. Hartwig, meaning little impact on 2007 earnings.(For more details, see NU, May 28, page 6.)

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

He added that one of the lessons from the WTC claim dispute isthe need to continue the federal terrorism reinsurance backstopunder the Terrorism Risk Insurance Act–due to expire at year'send–as well as elimination of ambiguities in contract language thatled to the litigation.

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

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

Randy J. Maniloff, an attorney for the law firm White &Williams in Philadelphia, which represents insurers, said the WTCdispute resembled the legal battles that arose after HurricaneKatrina.

“This is another example of insurers being a big target forthese kinds of situations,” he said. “There is a lot of pressureput on them to ignore their right to litigate a dispute when thingslike this happen.”

He added that it would not have been surprising to seelitigation drag on for another six years in this case if asettlement had not been reached.

“It's good for insurers to be seen agreeing to pay claimsbecause it is too easy to demonize the industry as having no soul,when legally we have to raise questions about whether there iscoverage,” Ann W. Spragens, senior vice president, secretary andgeneral counsel for the Des Plaines, Ill.-based Property CasualtyInsurers Association of America, said in an e-mail.

She said that such a characterization of the industry is “toocommon a theme in current public discourse, and it simply isn't thetruth.”

As for public officials stepping in to reach a settlement, shesaid they “can help facilitate such a resolution.” She noted thatMississippi Insurance Commissioner George Dale helped resolvehomeowners' claims from Hurricane Katrina in his state.

She added that the WTC settlement “may help remind both industryand government officials that there is a positive role that can beplayed in commercial lines situations, too, so it sets a goodexample from that perspective.”

The WTC claim dispute may not be over, however. Paris-basedreinsurer SCOR said it would seek arbitration over its reinsurancecoverage for Allianz, saying the settlement “does not respect theterms and conditions” of its contract.

A representative of Allianz said the company could not commenton its reinsurance contracts. Several observers, however, saidSCOR's decision would have no bearing on its payment under thesettlement.