S&P: Life Losses In Low Single-Digit Billions Of Dollars

S&P declined to give an estimate of the total property-casualty losses, but it said the insurance is strongly capitalized and can withstand an enormous financial hit without serioiusly weakening.

Carriers have acknowledged about $4 billion in losses so far. Although the total is likely to much higher, it would have to exceed $50 billion before analysts would worry about the stability of the insurance system, S&P said.

Hurricane Andrew, which flattened some southern Florida communities in August 1992 but killed fewer than 60 people, cost the property-casualty insurance system about $20 billion in 2001 dollars, S&P noted.

Back in 1918, U.S. life insurers faced $125 million in claims — about 0.5% of 1918 U.S. gross domestic domestic product, or the equivalent of $50 billion in 2001 dollars — as a result of a catastrophic influenza "pandemic" that killed 550,000 U.S. residents. National Underwriter reported at the time that most carriers paid claims immediately, and that few ran into serious financial problems as a result of the pandemic claims.

Representatives for the American Council of Life Insurers, Washington, say they doubt any U.S. life insurers will use terrorism or war exclusion clauses as a reason for denying trade center claims, but rating analysts are wondering whether reinsurers might have included terrorism or war exclusion clauses in reinsurance agreements, S&P says.