The price of insuring skyscrapers and other prominent buildings could triple following the massive claims created by the terrorist attacks in America, the UK insurer Hiscox warned yesterday.
Until now the insurance industry has warned of the increased premiums which airlines will have to pay. But Hiscox pointed out that if airlines are underinsured, as in the case of the attacks on the World Trade Centre and Pentagon, the burden falls to insurers of properties which are damaged.
Hiscox, one of the largest underwriters at Lloyd's of London, also estimated its own liabilities would be £20m as it unveiled interim results which otherwise showed strong growth.
Hiscox's estimate of liabilities came as analysts were beginning to agree that the Lloyd's market as a whole has liabilities of up to £1.5bn, which is 15 per cent of its capacity this year. Lloyd's is expected to publish its own estimate today.
Separately, insurers speculated that Lloyd's may have to dip into two US emergency funds, worth in total £5.3bn, to pay claims. These trust funds exist to guarantee that Lloyd's underwriters can meet potential liabilities in the US, but are not normallyused to pay claims. Lloyd's would not comment on whether it planned to use the trust funds in this way.
The London insurance organisation may also delve into its £340m central cash fund, financed by an annual levy on syndicates, to meet some of the claims. Lloyd's also has access to a reinsurance policy worth a further £350m if more than £100m is used from the central fund in any one year.