Insurers gauge effects on industry of Sept. 11 events

|tab|

In light of the terrorist attacks of Sept. 11, a wide variety of businesses has had to make major operational adjustments. |ret||ret||tab|

A most severely affected sector is the insurance industry. With policy reimbursement already in the billions and the potential for large future claims an uncomfortable possibility, the industry faces unique challenges.|ret||ret||tab|

"The insurance companies are just naked in the woods," said David Wilson, owner of All-American Agency LLC, at 4255 S. Glenstone Ave. "I mean, there's no defense for something like this." |ret||ret||tab|

Even though claims relative to the tragedy are exorbitant, Wilson believes insurance companies will continue to honor contracts in similar emergency situations.|ret||ret||tab|

|ret||ret||tab|

Reimbursable losses|ret||ret||tab|

While the deliberate destruction of life and property from acts of war are normally excluded as reimbursable losses under the terms of most standard insurance contracts, these claims will be covered, Wilson said. |ret||ret||tab|

"I think they'll just have to buck up and pay. That's all that can be done," he added. The inevitable public backlash from denying these claims would be too great, he said.|ret||ret||tab|

As insurance companies send out claim checks, the industry is considering ways to cope with the huge cash outlay it must still disburse. Insurers have limited options for recouping losses, according to Mike Right, vice president of public affairs for AAA. |ret||ret||tab|

"One, of course, is return on their investments. Return on investments right now is kind of weak, in the least," he said. "The other is to boost revenue from premiums."|ret||ret||tab|

One way to increase premium flow is to modify the terms of an insurance contract to more accurately account for heightened risk factors. Phil Wilkins, owner of Wilkins Insurance Agency Inc., 1670 St. Louis St., said, "There's been talk of adding an additional charge, like an endorsement, on the policy for terrorist coverage." The offsetting effect of this increase is to help "relieve some of the damage that's going to be done," he added.|ret||ret||tab|

|ret||ret||tab|

Insurance language|ret||ret||tab|

Another alternative under review to stave off similar enormous future claims involves greater specificity in insurance policy language. |ret||ret||tab|

Right said, "Definitive explanations of the coverages that are afforded by various policy protections" will be sharpened. Instances of "terrorism" and what qualifies as terroristic acts "are going to be pinned down" and more explicitly defined, he said.|ret||ret||tab|

Envisioning possible claim scenarios, however, is a difficult task at best. Dan Ruggeri, a partner with Employee Ben-efit Design, said that commercial insurers who cover targetable structures have to look at it "from a terrorist's point of view" and determine what are the "critical assets of the United States." Once this is agreed on, he added, insurers should limit their exposure and "sell off some of the risk" to reinsurers.|ret||ret||tab|

Ruggeri noted that the events of Sept. 11 caught everyone blindside. "I don't think this would be in anybody's actuary tables the fact that a terrorist attack could take down buildings of that magnitude and kill all those people. It's not something that you would even plan or price in the risk when you're writing a piece of business."|ret||ret||tab|

|ret||ret||tab|

Reduced capacity|ret||ret||tab|

One effect experienced locally has been the reduced capacity of some companies to accept new business, Wilkins said. |ret||ret||tab|

This is especially true of insurers who underwrite policies on property in the "excess and surplus lines," which are outside of the regular market areas. |ret||ret||tab|

The most obvious and immediate impact of the attack was reduced business activity. "We were just dead as a doornail," Wilson said, "We didn't get a phone call for two days." Since then his business has returned to previous levels, he added. "People rally," he said, "It all gets back to normal because our economy is so strong." |ret||ret||tab|

Ruggeri said his firm experienced a "dramatic increase in the purchase of individual life insurance" both through existing policy increases and in new policy sales. |ret||ret||tab|

He attributed this to two things: The concerns people had about their own mortality, and people taking the initiative in providing for their families in the event of their sudden death.[[In-content Ad]]