Insurance industry confident of meeting NY claims

The terrorist attacks in the US this week will not cripple the insurance industry as long as the total claims do not exceed $50bn (£34bn), Standard & Poor's, the credit rating agency said.

Tuesday's attacks on the World Trade Centre and the Pentagon may result in the largest insurance claim ever seen ­ more than the $20bn paid out in damages over hurricane Andrew that hit America in 1992. However, the insurance industry has rallied round to say it can and will meet claims.

Henri de Castries, chief executive of Axa, the world's biggest insurer, said: "It's going to be a very major claim. There is a range of between $10bn to $40bn put on the damages [from Tuesday].

"I think it will be at the higher end of that. But it's precisely the sort of thing the industry is supposed to cover," he commented.

Analysts said that while individual insurance companies may be able to estimate their losses from the catastrophe, it would be months before more accurate industry-wide data was available. Claims after earthquakes have been known to continue to come in for two years, they said.

The full extent of the damage to property in the US attacks is not yet known, nor is the death toll. Initial estimates have put the fatalities at 5,000. This could easily result in life claims of $1m per death, or a $5bn payout. Aviation, property and business interruption claims would be added to that.

S&P said that while the level of claims might be unprecedented, established insurance and reinsurance companies should be able to meet them.

Christian Dinesen of S&P said: "Once insurable losses exceed $10bn to $15bn, we would expect to see a significant impact on balance sheets of individual insurers. The totals, however, would have to exceed $50bn before we would begin to worry about the insurance system."

Axa estimated its own liability from the attacks at up to $400m. Yesterday, Royal & SunAlliance put it at £150m, while American International Group (AIG) said its losses would amount to $500m. So far, Munich Re, the German group, has the highest estimated losses at $900m.

Premiums will rise as a result of this week's disaster. Property, aviation insurance and war risks insurance premiums are the most obvious costs that will rise. Some companies will withdraw from certain business ­ covering skyscrapers, for instance.

Julian Avery, chief executive of Wellington Underwriting, said: "Reinsurance rates generally will have to rise. This will have a knock-on effect on all premiums."

Axa's Mr de Castries said that in the longer term, the industry would benefit because the tragedyunderlined the need for insurance.