Insurance on the World Trade Centre's twin towers will pay out for the loss of only one tower because experts believed that the collapse of both towers was too far-fetched to be worth insuring.
The Port Authority of New York, owner of the towers, is likely to receive an insurance payout of $1.5 billion (€1.65 billion), far below the $5 billion-plus value put on the towers before their collapse and only a fraction above their $1.2 billion construction cost in the early 1970s.
A spokesman for the US Insurance Information Institute said: "The possibility of the loss of both structures was seen as so remote that cover was not taken out on those lines. The $1.5 billioof coverage was purchased on the basis of a probable rather than a possible maximum loss." Estimates of the total cost of the terror attack on the US have spiralled to more than $15 billion, amid growing fears that Lloyds of London will be crippled by a huge payout.
Insurers are assessing the extent of the claims they face as a result of the terrorist attacks, which will include payouts on life assurance policies as well as property, loss of profits and worker compensation policies. Hardest hit will be US insurers and reinsurance companies who take over much of the risk on large customers from ordinary insurance companies.
International insurers and the London-based Lloyds market, which covers many airline and US risks, also face claims. In 1993 members of Lloyds syndicates paid out $510 million when the World Trade Centre was bombed by terrorists. Shares in insurance companies have fallen sharply, reflecting market concern. The Dow Jones Stoxx Index of European Insurers had dropped a 4.4 per cent by midday yesterday, following a 13 per cent slump on Tuesday. Insurers are usually sold heavily after disasters but markets sources described Tuesday's events as the most expensive man-made disaster ever for the industry.
Credit rating agency Moody's estimated the total bill for insurers at between $10 billion to $15 billion. The total bill for Tuesday's disaster will take years to establish. Insurers face claims on the life assurance and key person policies of the people killed in the World Trade Centre, the Pentagon and on the aircraft used in the attacks. Property claims can be expected from the airlines - United Airlines, part of the UAL Group and American Airlines, part of AMR Corp - and from the owners of the WTC and surrounding damaged buildings.
There will be liability claims against the airlines insurers from the families of the murdered passengers and employees. Acts of terrorism are covered on policies written in the US but not on policies written in the UK. And already insurers are reporting travel claims from people delayed at international airports.
Reinsurers Munich Re, Swiss Re and Allianz are understood to have about $3.2 billion exposure to the World Trade Centre building between them. Munich Re said it expected its costs to be about €1 billion which would hit profits.
