Thursday, September 11, 2003

Terrorism took a toll on insurers

By James McNair
The Cincinnati Enquirer

Two years after the terrorist attacks on U.S. soil, Cincinnati insurance companies are still paying claims.

Great American Insurance is less than halfway to satisfying an expected $23.5 million in losses stemming from the carnage of Sept. 11. Cincinnati Insurance has paid out about $1.5 million of an estimated $8.8 million exposure. Ohio Casualty has cut checks for almost all of its $3 million in claims.

"We were very lucky," said Joan Shevchik, a spokeswoman for Cincinnati Insurance in Fairfield. "All but $300,000 was from an insurance pool for some of the airliners that went down; $300,000 is very minor, so you can see this was a pretty small thing for us."

The losses of Cincinnati-based insurers are indeed minuscule compared to the financial harm brought on the insurance industry as a whole. The Insurance Information Institute expects payouts to ultimately reach $40 billion. It calls the day of terrorism the biggest insured catastrophe in the history of the world.

"The losses sustained by the insurance industry were unprecedented in virtually every respect, producing catastrophic losses not only in property coverages, but also for the first time in life insurance, disability and workers compensation lines," said Robert Hartwig, chief economist of the New York-based institute.

More than 100 insurance companies are sharing the loss, led by Lloyd's of London. Money is being paid for everything from loss of life to lost computer files.

Claims cover "the buildings, the property inside the building, cars in and around the buildings or parked under the towers," said Stephanie Eakins, a financial analyst with Weiss Ratings, an insurance industry research firm in West Palm Beach, Fla. "There were a lot of workers compensation claims for people injured or killed and business interruption claims. American Express had some travel insurance claims."

Great American, a unit of American Financial Group, incurred losses from its coverage of buildings, equipment and people who died in the World Trade Center attack. "We represented a number of the workers in the Windows On the World restaurant," said Keith Jensen, an AFG senior vice president.

Seventy-three restaurant employees died. The restaurant was on the 106th floor of the north tower.

Jensen said Great American's liability depends on whether the toppling of the two skyscrapers is considered one event or two, an issue that is being debated in court. The difference for Great American, he said, is a "couple million dollars."

Cincinnati Insurance's estimated $8.8 million loss was relatively small considering that it incurred $64 million in catastrophic losses in 2001, mostly for windstorm damage. Among its policyholders: American and United airlines, a small sandwich shop across from the World Trade Center and a dentist's office in the Pentagon.

Ohio Casualty's estimated loss of $3 million from the Sept. 11 attacks represented less than a tenth of its $34.6 million in catastrophic losses in 2001.

"For the most part, most of our losses were property," said Ohio Casualty spokeswoman Cindy Denney.

"There were some autos that were damaged, and we had a nice restaurant one block away and one block over from the towers that was damaged by soot and dust. There was also a telecommunications firm in one of the towers whose equipment was insured."

In becoming the most expensive disaster in history, the Sept. 11 attacks passed Hurricane Andrew of 1992 ($19.6 billion) and the Northridge earthquake in California in 1994 ($16.3 billion).

Toll on insurers

The attacks were the costliest disaster in U.S. and world history. Insured losses totaled $40.2 billion.

Losses by types of insurer
Business interruption: $11 billion
Non-aviation liability: $10 billion
Property (excluding Twin Towers): $6 billion
Twin Towers: $3.5 billion
Aviation liability: $3.5 billion
Life: $2.7 billion
Workers comp: $2 billion
Event cancellation: $1 billion
Aviation hull: $500 million

Losses for local insurers
Great American Insurance $23.5 million
Cincinnati Insurance $8.8 million
Ohio Casualty $3 million
Ohio National waiting
Source: Insurance Information Institute, Weiss Ratings and respective companies


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