Zurich Financial Services (ZFS), the Anglo-Swiss insurer, yesterday doubled its estimate of losses it expects to incur from the terrorist attacks on the US and warned profits would be hit by the continuing volatile markets.
The company now expects its liabilities will be between $700m and $900m (£480m and £616m), up from its earlier estimate of $400m. The announcement sent its shares down 4.3 per cent, to 335 Swiss francs (£141.35).
ZFS, Europe's third-largest insurer, said that the terrorist-related claims will be the largest insurance loss in the company's history, centering on its US general insurance and reinsurance arms. It is still less than 2 per cent of its gross annual premiums of about $55bn.
The company, which put its initial estimate out on the day after the hijacked planes ploughed into the World Trade Centre and Pentagon, said it had changed its estimate due to further developments.
A ZFS spokeswoman said: "Some of the surrounding buildings came crashing down, and we have also revised reinsurance contracts to ensure they are very solid."
The increase in ZFS's likely liabilities follows guidance from reinsurance giants Munich Re and Swiss Re that they, too, had significantly increased their estimates of liabilities.
Uncertainty over the final bill continues as liability for not preventing the terrorist attacks has still not been established, and is unlikely for some time. Insurers are still not clear about how wide the level of business interruption cover will be.
ZFS said income would be further affected by the "now widely affected delay in economic recovery". This is likely to affect Zurich's asset management and life assurance arms, two types of business that invest heavily in the stock market. The insurer was expected to report annual net profits of $1.8bn-$2bn.
ZFS also said that it, in line with other insurers, it was experiencing improvements in insurance premiums rates even before the events of 11 September. Since the attack, "premium rates have further dramatically increased", which should improve opportunities to gain new business in the next year.
The insurer said that its capital position remained strong with shareholders equity of $19bn unchanged from 30 June.