World Trade Centre ruling threatens to double liabilities for RSA and Zurich

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The Independent Online

Royal &Amp; Sunalliance and Zurich Financial Services came a step closer to seeing part of their World Trade Centre liabilities doubled this week, after a US court said they had not used appropriate documentation to ensure the attack was treated as one, and not two incidents.

Royal &Amp; Sunalliance and Zurich Financial Services came a step closer to seeing part of their World Trade Centre liabilities doubled this week, after a US court said they had not used appropriate documentation to ensure the attack was treated as one, and not two incidents.

At the same ruling, eight other insurers, including a Lloyd's of London syndicate led by Hiscox, were cleared of facing a double liability. Hiscox shares rose 1 per cent on the news, closing at 159p.

RSA and Zurich, along with the US insurer Hartford, must pin their hopes on the second stage of the trial, which will decide whether the terrorist attack did in fact constitute two separate events. RSA is facing a liability of $127.8m (£72.1m), which could double if the case is lost, while Zurich faces a liability of $45.7m.

The jury failed to make a decision on a $877.5m policy issued by Swiss Re, and will continue deliberation on its verdict on Monday. Tim Dawson, an analyst for Pictet, said: "Zurich is up for about $46m, which is tiny for them. Even the $878m that Swiss Re is facing is fairly immaterial in the context of their enterprise value. But $128m for Royal & Sun - that is more significant."

RSA has made provisions for its liabilities, but refused to specify how much. It said this week's ruling was only the first step in a three-stage process. RSA's shares fell almost 4 per cent yesterday, closing at 80p.

The developer Larry Silverstein, who leased the World Trade Centre, is now facing a financing gap of at least $3.5bn for his new construction project at Ground Zero. Even if he is successful in forcing Swiss Re and RSA to pay double, the most he can now receive for his total claim is $5.5bn. The World Trade Centre project is set to cost more than $9bn. Mr Silverstein vowed to appeal against the rulings.

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