WEISS RATINGS

Domestic Insurers Report Net Claims of $8.5 Billion
from September 11 Attacks

PALM BEACH GARDENS, Fla., September 3, 2002 -The nation's property and casualty insurers reported $8.47 billion in net claims 1 arising from the September 11 terrorist attacks, according to research by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In reviewing more than 1,100 year-end 2001 statements filed with the National Association of Insurance Commissioners (NAIC), Weiss found that the insurers recording the largest dollar amount of net claims from the September 11 terrorist attacks were:

Company Domicile
State
Weiss
Safety
Rating
Net Claims
9-11
(000)
Loss as %
of Capital
& Surplus
General Reinsurance Corp. Del. B- 1,533,000 41.01
National Indemnity Co. Neb. B+ 694,500 4.69
St. Paul Fire & Marine Ins. Co. Minn. B 559,360 13.50
Allianz Ins. Co. Calif. C 464,556 21.02
American Re-Insurance Co. Del. C 449,800 17.02
Swiss Reinsurance America Corp. N.Y. C 346,000 15.26
Hartford Fire Ins. Co. Conn. B 268,505 4.79
Travelers Casualty & Surety Co. Conn. B 217,200 7.24
Hartford Accident & Indemnity Co. Conn. B- 211,504 17.63
Auto-Owners Ins. Co. Mich. A+ 200,000 7.15

Two groups of insurance companies, Berkshire-Hathaway and Hartford Fire & Casualty, each had two companies among the top ten insurers reporting the largest claims. Combined, the four companies - General Reinsurance Corp., National Indemnity Co., Hartford Fire Insurance, and Hartford Accident and Indemnity Co. - lost nearly $3 billion from September 11 claims.

Companies posting the largest net claims from the attacks, measured in terms of their impact on capital and surplus, were:

Company Domicile
State
Weiss
Safety
Rating
Net Claims
9-11
(000)
Loss as %
of Capital
& Surplus
General Reinsurance Corp. Del. B- 1,533,000 41.01
St. Paul Surplus Lines Ins. Co Del. C+ 18,240 28.80
Shelter Reinsurance Co. Mo. B- 17,900 27.89
CNA Lloyds of Texas Texas C 500 24.61
American Agriculture Ins. Co. Ind. C+ 61,500 21.86
Allianz Ins. Co. Calif. C 464,556 21.02
Zenith Ins. Co. Calif. C 48,000 19.01
CGU Ins. Co. of NY N.Y. C- 6,867 18.17
Hartford Accident & Indemnity Co. Conn. B- 211,504 17.63
American Re-Insurance Co. Del. C 449,800 17.02

"The losses from the terrorist attacks made a big dent in the capital of some firms, especially General Reinsurance," said Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc. "However, even in this worst-case situation, the companies still had adequate capital to cover the losses. Most insurers were positioned to weather the losses through reinsurance coverage and strong capitalization. Unfortunately, despite the industry's strength, this catastrophic attack will result in yet another round of rate increases for consumers."

Industry Response

Last year's terrorist attacks contributed to the property and casualty insurance industry's first-ever loss and propelled the Insurance Services Office (ISO) to create a terrorism exclusion clause for commercial policies. The new language, adopted by 45 states, Washington, D.C., Puerto Rico, and Guam2, excludes coverage on claims arising from acts of terrorism. Of the five remaining states, New York and California are considering revisions to the ISO exclusion, while Texas and Florida have yet to rule on any form changes. Only one state, Georgia, rejected the new terrorism exclusion language.

Since last year, Congress has debated the issue of a federal backstop for insurance against terrorism. The program would require the federal government to subsidize a percentage of insurers' losses from terrorism-related incidents. Both the House of Representatives and the Senate have passed legislation on a federal program. The House proposal (HR3210) requires the insurance industry to be responsible for terrorism damages up to $1 billion, with federal funding available for $5 billion or more in damages. The two-year plan limits the federal government's exposure to $100 billion in claims. Under this proposal, all insurers, regardless of their level of exposure, would be required to reimburse the federal government for loans paid out under the plan. Even companies that receive no federal funding from this program would be obligated to assist in the repayment. This plan allows insurers to pass some of the costs along to policyholders in the form of surcharges.

In contrast, the one-year, Senate-approved legislation (S2600) requires insurers to cover terrorism-related damages up to $10 billion. The backstop program would provide relief to insurers for damages in excess of $10 billion and limit the government's exposure to $100 billion in claims. However, the Senate proposal does not require insurers to repay any of the monies, leaving the full burden for funding on taxpayers.

"Both proposals place a huge burden on consumers, and neither bill offers an adequate long-term solution for addressing new challenges associated with the increased risk of terrorism," cautioned Dr. Weiss.

Weiss issues safety ratings on more than 15,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 9,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through weissratings.com, or starting at $15 by calling 800-289-9222.


1 Net claims equal gross claims plus reinsurance assumed less reinsurance ceded.

2 Source: International Risk Management Institute (www.irmi.com)


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