Losses May Total as Much as $10 Billion

Insured losses from Tuesday’s terrorist attacks probably will exceed any previous man-made disaster in U.S. history, but won’t match natural catastrophes such as $19-billion Hurricane Andrew or the $15-billion Northridge earthquake, insurance experts said.

“This a $5-billion to $10-billion event, I would imagine,” said John M. Roberts, an insurance analyst with J.J.B. Hilliard, W.L. Lyons in Louisville, Ky., who predicted higher insurance rates nationwide as insurers assess the damage in New York and Washington and contemplate the possibility of future attacks.

U.S. stock markets were closed Tuesday, but European insurance stocks tumbled on the disaster news as investors anticipated huge losses. Insurance officials said the costs were unlikely to be high enough to threaten the industry’s stability.

“The industry can certainly absorb a loss [of this size] without causing major disruption or insurance failures,” said David Lackey, president of Weiss Ratings of Palm Beach Gardens, Fla., an independent rating agency.

Insurers said it could take days or weeks for official estimates of the destruction to be made. The disaster will affect every aspect of insurance, they said, from life and property coverage to workers’ compensation, disability and business-interruption policies.

Life insurers were gearing up for what is expected to be an unprecedented number of claims. In addition to the nearly 300 people on board the planes that crashed, thousands may have perished inside and around the World Trade Center buildings and Pentagon.

Other experts, however, said property and liability insurance payouts from the World Trade Center collapse could be limited if the buildings’ policies specifically excluded terrorist acts.

Although insurance policies typically pay for damage and death resulting from terrorism, several industry experts said the center’s insurers may have written policies to exclude such coverage after the center was bombed in 1993.

It was not clear Tuesday how many companies insured the center or what their policies covered, although Hartwig said “there would probably be dozens of companies included in insuring these buildings.”

The insurers probably spread their risk by buying policies from other companies, known as reinsurers. Munich Reinsurance Co., the world’s largest insurer of insurance companies, said it may incur “a considerable burden” from the attacks. Analysts said Lloyd’s of London, Chubb Corp. and Berkshire Hathaway Inc. also may face significant claims.

Munich Re shares fell 14%, while an index of 29 European insurers fell 13%.

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Bloomberg News was used in compiling this report.