‘Act of War’ Exclusion Doesn’t Apply to Attacks, Insurers Say

Some leading U.S. and European insurers say the destruction of the World Trade Center was not an act of war and therefore covered under most insurance policies.

If other insurers take the same view, that means insurance companies around the world will have to pay out the $30 billion or so in claims expected by industry experts from the attack.

“The acts-of-war exclusion does not apply to Tuesday’s events,” insurer Chubb Corp. said last week. The Warren, N.J.-based business insurer expects to pay out as much as $200 million for the attack.

Under most property and liability policies, acts of war are excluded to protect insurers from overwhelming claims in the event of a war. Some analysts had suggested that insurers might invoke the exclusions to avoid payment.

Although President Bush has repeatedly called the attack an “act of war,” it is generally accepted that the exclusion applies only in the case of a declared war between two or more sovereign nations.

“I have no doubt that the insurance industry has no other choice at all than to pay, for political reasons as well,” said Bruno Porro, a member of the executive committee at the world’s second-largest reinsurance group, Zurich, Switzerland-based Swiss Re, in an interview published in the Finanz und Wirtschaft newspaper Saturday.

Swiss Re has said it expects more than $700 million in claims.

Claims probably would not be disallowed under terrorism exclusions either, Porro said. “Terror damage has to be covered because insurance polices, especially in the United States, do not mention this as a rule,” he said. To settle such an issue, Porro called for a broad, industrywide agreement on how to resolve claims.

Other U.S. insurers agreed that the attack was not an act of war.

“No life or disability claims for the events of Sept. 11 will be refused on the basis of a war exclusion,” Ed Zore, chief executive of life insurer Northwestern Mutual, said this week.

Northwestern is the United States’ leading individual life insurer and has received a handful of claims from families of policyholders who were on airplanes used in Tuesday’s attacks.

Hartford Financial Services, which sells car, home, business and life insurance, also has said the act-of-war exclusion would not apply.