Lloyd's of London was confronting one of the biggest crises in its 300-year history as its analysts assessed the financial cost of the devastation and loss of life in Tuesday's attacks on the World Trade Centre and Pentagon.
Amid predictions that the total bill would run to tens of billions of pounds, the attacks have come at a dreadful time for the historic London insurance market, whose finances are still recovering from a series of hefty payouts in the past decade. Its loss adjusters were working around the clock to quantify the exact level of Lloyd's exposure.
Sax Riley, the Lloyd's chairman, said yesterday it was still impossible to put a price on the loss. "The tragic events have generated the most complex set of insurance liabilities and interdependences the industry has ever seen," he said.
So far, estimates for the total costs in claims have varied, with some analysts expecting the final bill to be in the region of £28bn. Indications suggest claims on life assurance policies will form the largest part of the claims, with the bill from the destroyed buildings and aeroplanes and loss of earnings also stacking up.
If claims do reach this level, it would be the largest cost the insurance industry has yet faced. The largest to date was the $20bn (£13.6bn) that the clear-up operation after Hurricane Andrew cost when it devastated the east coast of America in 1992.
Many of the UK's insurers have already said that they face claims after the attacks in New York and Washington. But among British insurers it will be the Lloyd's market – which is made up of more than 100 smaller organisations – that will be liable for the largest share of costs.
Kevin Willis, director of the financial ratings agency Standard & Poor's, said: "Lloyd's is the major insurance market covering world risks, particularly catastrophes like this. There is no doubt that many of the claims will come home to roost there."
Lloyd's writes a large amount of the world's aviation insurance and has already acknowledged that some of its underwriters provided cover for United Airlines and American Airlines, the two companies involved in Tuesday's events.
Lloyd's also confirmed that it is partly responsible for the cover of the World Trade Centre's twin towers, which were thought to be insured for $3.2bn when their lease was awarded to the American property giant Silverstein two months ago.
Lloyd's is no stranger to paying for the world's disasters and yesterday paid its customary respects to victims by ringing the salvaged bell of HMS Lutine, a Lloyd's-insured ship that sank in 1799. In the past it has shouldered the £357m bill when the World Trade Centre was attacked in 1993. Other substantial payouts included some of the £1bn paid after the Piper Alpha oil platform explosion.
Most experts think the latest loss could be more than either of these, but will probably not bankrupt the 300-year-old organisation. "It is designed to absorb risks of this nature. The suspicion from this early stage is that it will be a shock to the system, but it will survive," Mr Willis said.
Yet the latest costs could not have come at a worse time. Lloyd's was just emerging from a decade-long court case with the private individuals known as Names, who used to provide most of the capital for the market. With this case settled and the departure of most Names – seen these days as a hindrance to the growth of the market – Lloyd's had hoped to make a profit this year after years of heavy losses. That now is certain not to happen.
There will be plenty of others companies that will endure a substantial blow this year due to the massive claims generated. CGNU, the UK's largest insurer, estimated its liability could be as high as £35m, and Royal & SunAlliance has predicted it will be significantly affected because it does 25 per cent of its business in America.
More global insurers will be hit far harder, with predictions from the European insurers Allianz of up to £460m and Axa of up to £286m, and Zurich Financial Services saying it faces claims in the region of £280m.
Most industry figures to expect the greatest concentrations of costs outside Lloyd's to come to the giant reinsurance companies that operate on a global scale and pick up business from insurance companies which themselves want to pass on some of the risks on their books. The world's largest reinsurer, Munich Re, has already lodged the highest estimate of costs made public so far, saying on Wednesday it faced a potential payout of £620m.