The Lloyd's of London insurer Hiscox yesterday increased provisions for losses from the terrorist attack on the World Trade Centre in September 2001 but it said profits for the first half of that year were still on track to hit £25m.
The upmarket insurer, which specialises in fine art and also writes big-ticket property policies, incurred one of the largest losses among UK insurers when terrorists ploughed two planes into the Twin Towers.
Hiscox has received claims worth $588m (£372m) from policyholders from the 11 September attacks. The company's Lloyd's syndicate, which wrote the WTC policy, has now reserved enough to cover the claims in full, increasing its own provision to £80m, with the rest covered by its reinsurance.
The cost of the provision is measured according to the impact it made on the amount of business the syndicate wrote in 2001.
The impact to the capacity in the year was £40m. As Hiscox owns 53 per cent of the syndicate, it will have to pay £25m to cover the cost of the increased provision. The remaining £15m will have to be met by the individual Names who also invest in the syndicate.
Bronek Masojada, the chief executive of Hiscox, said: "We have said that we expect to make £25m in the first half of 2001. We are saying that we will still make that, showing that the underlying business is very strong." Hiscox's shares rose 7p to 158p.
Lloyd's insurers still account on a three-year system, as well as annually, which is why the books for 2001 are not yet closed.
Hiscox, along with a host of other Lloyd's companies and also international giants such as Swiss Re, have been in complex legal wrangles about the cost of the 11 September attacks for months.
The insurers argue that the destruction of the WTC was one event, meaning that Larry Silverstein, the property tycoon who owned the lease on the towers, should only claim on his property insurance once.
Mr Silverstein argues the attacks were two events, which would allow him to double his claims to up to $7bn. A court in New York ruled last year that the onslaught constituted a "one-loss" event. Mr Silverstein is appealing, and another hearing is due this autumn.
Hiscox, which also writes kidnap and ransom insurance and cover for space rockets, had deliberately held less in reserves to cover WTC claims than the total amount policyholders have demanded.
The company believes claimants exaggerate what they think they are owed initially and then reduce the sum.
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