Concern is growing among financial credit rating agencies about the impact on the insurance industry of the attacks on the World Trade Centre and Pentagon.
Standard & Poor's, one of the main credit ratings agencies, yesterday said it was likely to assign a watching brief "with negative implications" to many insurers and reinsurers that had exposure to the attacks. The move came after the Moody's ratings agency sounded a strong warning about the fall-out from the tragedy in a note which said the cost to insurers "will be exceptionally severe".
Both agencies predicted the eventual bill would be much higher than insurers' current estimates of $14bn (£9.6bn).
Fresh evidence of the massive financial strain created by the attacks also came from companies themselves yesterday, with the Lloyd's of London insurer Kiln saying it faced losses of about £16m. Atrium Underwriting also warned its results would be affected by its exposure. Shares of both companiesplummeted, with Kiln closing down 15p at 36.5p and Atrium falling 12.5p to 46.5p.
The warnings follow a host of gloomy statements from insurers, with the Lloyd's market and other UK insurers saying they would be heavily hit.
S&P said that once losses exceeded $15bn "it would expect to see a significant impact on the balance sheet of individual insurers". Neither S&P nor Moody's has downgraded the credit ratings of specific insurers yet but they are widely expected to do so in the next few days.
S&P stressed that while the costs would be very high, it did not believe that they would cripple the industry. Rob Jones, director of S&P, said: "Totals would have to exceed $50bn before we would begin to worry about the insurance system."
There has been plenty of speculation that some smaller companies would be driven into insolvency by the claims they must pay out.
S&P said the indications so far were that large insurers and reinsurers would not face "solvency threatening levels of claims from this catastrophe".Reuse content