Insurers braced for record bill
LONDON, England -- Only one of the World Trade Center towers was insured because experts believed the chances of both collapsing simultaneously was too far-fetched, it has emerged.
The towers' owners, the Port Authority of New York, will only receive an insurance payout of about $1.5 billion (£1 billion), far below the $5 billion-plus (£3.3bn) value put on the towers before Tuesday's terror attack, it was reported on Thursday.
A spokesman for the U.S. Insurance Information Institute told the London-based Guardian newspaper: "The possibility of the loss of both structures was seen as so remote that cover was not taken out on those lines.
"The $1.5bn of coverage was purchased on the basis of a probable rather than a possible maximum loss."
Insurance analysts say the attack on the U.S. would be the most expensive man-made disaster ever.
Estimates of the total cost of Tuesday's attack stands at $30billion. Insurers face claims for damage to the World Trade Center and surrounding buildings, plus the costs of business interrupted while buildings are repaired or rebuilt.
The airlines involved will also face large liability claims which are covered under their insurance policies.
"It is safe to assume claims will be in billions," Robert Hartwig, chief economist for the Insurance Information Institute, who witnessed the crashes, told Reuters.
The losses will almost certainly dwarf the previous record of $16bn paid out after Hurricane Andrew in 1992 and will be the biggest insurance catastrophe in history.
Insurer Lloyd's of London is expected to be worst hit because its aviation syndicates insure about 35 percent of the world's planes.
Until the events in New York, insurers regarded a collision of two planes over a major city as the worst conceivable "realistic disaster scenario."
But economist Tim Congdon, of Lombard Street Research, told the Guardian: "(The) tragedy is far worse than any conceivable 'realistic disaster scenario' considered by insurance companies.
"The loss will have a devastating effect on some U.S. insurance companies ... and Lloyd's will of course also take a bad hit."
Lloyd's would not comment on the extent of its exposure as it was still assessing the impact.
Its chairman Saxon Riley told the Press Association: "The situation in New York and Washington is evolving continually. The global social and economic effects are just starting to be felt.
"Any calculation of the total losses so soon after the event can only be deeply flawed."
Richard Shaw, pan-European insurance analyst at Credit Lyonnais Securities, warned the full cost of the disaster was likely to be far higher than the initial estimates.
He said: "It will take a long time for the full extent of the cost to be known. It is going to be higher than $15bn (£10bn) and it could be higher than $40bn (£27bn)."
The World Trade Center was built in 1973 at a cost of $750 million but the damage caused by two airplanes crashing into it today will cost insurers billions of dollars, an U.S. industry representative said.
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