Earlier this month, insurance company Royal & SunAlliance increased the estimate of its total costs arising from the attack on the World Trade Center from around #150m to around #200m, before tax relief and after reinsurance recoveries.
The company, which is the UK’s biggest and oldest insurer and which publishes its results next Thursday, said it came to these conclusions after ‘actively working with its clients to develop additional information about the nature and extent of losses sustained by those clients’.
But it added: ‘The unprecedented nature of the WTC event means that it will be a significant time before the final loss figures for the market as a whole can be known with certainty.’
The terrorist attacks have created uncertainty in the insurance and reinsurance markets. Moody’s investors’ service has put the insurance financial strength and long-term ratings of a number of companies, including Royal & SunAlliance, on review for a possible downgrade.
It said the 11 September terrorist attacks raised a number of concerns for insurers, including the degree of uncertainty surrounding current estimates of loss, the magnitude of the actual losses already reported, and the changing perception of the industry’s risk profile.
It added that these uncertainties would take a long time to be resolved but would be materially reduced over time.
Nervous investors also caused the Financial Services Authority to relax its rules for insurance companies to prevent panic selling of their shares as the insurance bill for the attacks grew.
But according to a spokeswoman from the Association of British Insurers, the industry was not on firm ground before the attacks and the link between the current state of the sector and the attacks is indirect.
She said there was pressure on rates and liability claims because Britons were becoming more litigious, but that this was being tempered by a very competitive insurance market.
‘Competition reigns in a lot of the pressure for higher premiums,’ she said. ‘Insurers at the moment are tending to pay out more in claims than they receive in premiums.’
Although a spokesman from Royal & SunAlliance said he could not comment on the company’s current situation, he said the group takes in over #11bn a year in premiums .
The company’s biggest centre of operation is the UK, where its chief executive is management accountant Paul Spencer.
– For details about the company go to: www.royalsunalliance.com
Annual results to 30 June 2001
Group operating result: #375m
Operating costs: #158m
Group operating profit: #217m
Executive directors: Robert Mendelsohn, group chief executive, appointed December 1997; Julian Hance, group finance director, appointed October 1998; Paul Spencer, UK chief executive, appointed January 1996
Company profile: Multinational insurance group Royal & SunAlliance was created in 1996 from the merger of Royal Insurance, The Alliance and Britain’s oldest insurance company The Sun (established in 1710). It operates in 50 countries and has 20 million clients.
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