Insurers face terror audit
Auditors facing unprecedented difficulties verifying insurance losses from September 11 are making special reference to the catastrophe as they sign off company accounts.
As a result of concerns over the potential scale of insurance claims, concerned auditors are making the point in their audit opinions that there is a greater than normal uncertainty over losses arising out of the tragedy.
Deloitte & Touche, for example, has added a paragraph to its audit opinion of the annual report of aviation insurance specialist Amlin, published last week, dealing with the issue.
It said: ‘The group has made provisions for losses and reinsurance recoveries based upon the assumptions set out in the note. The eventual settlement of claims may result in net losses greater or lower than those provided.’
But the auditor did not qualify the company’s accounts as a result, and Amlin has published a two-page special section in its accounts attempting to estimate the cost of the terrorist attacks.
KPMG partner Hitesh Patel, an insurance audit specialist, commented: ‘There will be a number of companies which will have a special reference to the World Trade Center incident. There are uncertainties in the course of insurance audit, but this is more uncertain than you would normally account for.’
Patel said September 11 was one of the largest losses ever to hit the insurance industry and the cost of the tragedy remains unknown after more than seven months.
The uncertainty surrounding the insurance costs of the tragedy are centered around a web of potential legal disputes and claims. Although smaller insurers will find it easier to estimate losses, most will be unable to account for the fallout for many years.
Experts say insurers and their auditors will have to look at costs arising from a range of insurance claims – from personal, to buildings to business interruption.
They also face other hurdles, such as global companies that have worldwide insurance policies, making it unclear as to the amount of coverage the specific WTC office had. There are also differences in US and UK laws that are likely to create disputes.
In the US, the world’s second-largest insurance company Swiss Re has already taken WTC owner Silverstein to court. Silverstein is demanding $7.1bn (£4.9bn) in insurance payouts, saying the attacks were two separate incidents, but the insurer claims it was a single event, so will only pay $3.5bn.