A.M. Best Comments on its Ratings Subsequent to the World Trade Center Verdict
OLDWICK, N.J. — After a preliminary assessment of the impact of the recently announced verdict that the 9/11 attack on the World Trade Center was two insurable events, A.M. Best Co. does not believe this decision, itself, will result in any rating changes for the nine insurers affected (see list below), or for their reinsurers.
The two occurrence verdict will result in an additional $1.1 billion of losses for the named insurers and their reinsurers. Most of the affected carriers have commented that the verdict will have minimal or no impact on 2004 earnings. However, had the verdict been favorable to the insurers, reserves previously held for this potential decision could have been allocated elsewhere or added to earnings. In addition, Best notes that those insurers that did not hold reserves for this outcome may incur a charge to earnings and/or a reduction in their financial flexibility related to their ability to fortify other potential weaknesses in the balance sheet.
Despite these potential impacts, given the diversification of the losses, the strength of the companies affected and, most importantly, their favourable 2004 earnings to date–including the significant weather events–the overall financial strength of each of these companies remains supportive of the assigned ratings.
The nine insurers involved are: Allianz Global Risks United States Insurance Company., a subsidiary of Allianz A.G.; Travelers Indemnity Company and Gulf Insurance Company, both now part of St. Paul Travelers Companies. Inc.; General Electric subsidiary Industrial Risk Insurers; Royal Indemnity Company, an affiliate of Royal & Sun Alliance Insurance Group plc; Fairfax Financial Holdings Ltd.’s TIG Insurance Company; Tokio Marine & Fire Insurance Company, a unit of Millea Holdings Inc.; Twin City Fire Insurance Company, a subsidiary of Hartford Financial Services Group Inc.; and Zurich American Insurance Company, a unit of Zurich Financial Services Group.
A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best’s Web site at http://www.ambest.com.
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