Best’s News & Research Service - May 09, 2002 04:47 PM (EDT)
Industrial Risk Insurers to Settle Claim on 7 World Trade Center
NEW YORK //BestWire// - Employers Reinsurance Corp.'s Industrial Risk Insurers said it has agreed to pay a claim for 7 World Trade Center, although a final price hasn't been settled yet.
Dean Davison, a spokesman for ERC, which is owned by General Electric Co. (NYSE: GE), said the company had completed its initial investigation and is moving into the settlement and adjustment phase on the building, which was destroyed Sept. 11 along with the 110-floor twin towers. Larry Silverstein, the developer of the 47-floor building-and the leaseholder of the towers-said the claim will be for $861 million, according to the Wall Street Journal. A spokesman for Silverstein directed comments to Silverstein's lawyer, who couldn't be reached for comment.
But Industrial Risk hasn't written a check for $861 million yet. "That's not a figure that we have agreed to," Davison said. "We are just in the process of determining what the ultimate payment will be. We don't have a final figure yet, because we still have considerable work to do to adjust the claim. It's pretty complex. Obviously, it is a large loss and one that we are honoring our commitment to the insured on."
Industrial Risk was the primary writer on 7 World Trade Center and had bought "considerable" reinsurance and retrocessional insurance on the property, Davison said, although he declined to give specific details about the contract.
In November, Industrial Risk Insurers, which had built a niche offering coverage of as much as $1 billion on large-risk properties such as the World Trade Center, said it would change its strategy. The company said it would still serve Fortune 3000 companies, however, it now limits its risk appetite to $10 million on a primary level and hopes to participate in structured programs (BestWire, Nov. 7, 2001).
Despite the timing of the business model change, the company said the decision to stop taking large exposures on highly protected risk properties was made several weeks before Sept. 11, although it was not implemented until after the disaster, Davison said.
Employers Re, IRI's parent company, was one of the 22 insurers that wrote coverage for the World Trade Center towers and has said it expects a total of $600 million in losses, or $400 million after tax, from the Sept. 11 attacks.
Swiss Re, which wrote 22% of the cover on the twin towers, is suing Silverstein, contending that the destruction of the towers should count as one insured event, valued at $3.55 billion. Silverstein has countersued, saying the destruction was caused by two events. He is seeking two $3.55 billion claims, for a total of $7.1 billion.
A spokesman for Silverstein told the Wall Street Journal that the developer planned to rebuild the office building at 7 World Trade Center and could break ground in June to build a 1.7 million-square-foot building.
GE Global Insurance Group is rated A++ (Superior) by A.M. Best Co.
(By Meg Green, senior associate editor, BestWeek: meg.green@ambest.com)