Who is paying for the world trader center property destruction
Interview: Sungard Institutional Brokerage.---Dudack, Gail---Equity Strategist(slow)
>> the battle over who is paying for the world trade center property destruction is not over. the issue? whether the attacks of september 112001, were one event or two. billions of dollars are at stake insurers will be liable for $3.5 billion for one attack and $7 billion for two. swiss rehas the most at stake, paying $781 million for one attack, twice that amount for two. earlier i discussed the issue with swiss reamerica c.e.o. jack dubois.
>> from our standpoint what happened on september 11 was a single quort coordinated attack on a single insured property leading to a single occurrence. we have to step back and remember that when mr. silverstein came to the market to buy coverage for the world trade center, he insured the world trade center as one single property, as if it were a single house or a single car. he also insured it for a limit of up to $3.5 billion in the event of total destruction. now, at the beginning of his search for the insurance proceeds, he actually sought $5 billion of coverage, and sought to buy a replacement policy with it at that time. but when he learned the premium price for that, he decided to instead buy simply a $p.5 billion cover which would be the amount in total pay and no more, in the event of a total destruction of the property.
>> now, in what mr. silverstein is saying is that apparently on july 23rd, 2001, an email that they sent out said that they intended to buy insurance based on a travelers policy form which leaves the definition of the word “occurrence” open. and mr. sill streern says, “under new york law they say whenever there is no explicit did he have definition of occurrence, the most immediate cause,” “his words being two separate plane crashes being two separate things will determine the number of payouts. that’s what is going to be litigated.
>> what is going to be litigated is which policy form is which insurance company bound to. now, swiss rebound its coverage to the world prop policy form. it’s the insurance policy form that silverstein wanted. it’s the policy form he distributed to all insurers. under that policy form there is a broad definition of occurrence that describes occurrence as all losses and damages arising directly or indirectly from one cause or a series of similar causes, irrespective of the time or area over which those losses occurred. he wanted that definition for the simple reason he wanted to limit his deductible payments. the district court in ruling against him in summary judgments agrees with this position. the appellate court agrees as well.
>> his spokesperson says they say that swiss re’s litigation that is bound to the will prop form is blown out of the water, in their words, by the second circuit’s decision saying it can be shown that the insurer was provided with a traveler’s form prior to issuing its binder there.
>> that’s not accurate because swiss rebound its coverage under the world trade center coverage on july 17th of that year.
>> ok.
>> we are bound to the world prop policy form.
>> let’s move on from that at this point, then. rl this is going to be litigated. we’ll be hearing more about that in the future. there is much more to swiss rethan this particular issue. let me ask you about the proposed $114 billion asbestos trust fund under negotiation in the u.s. senate. would you participate in that?
>> we would participate assuming the $114 billion remains the number and does not increase. and presuming certain conditions and if shoes and details that have to be worked out, are, you know, are agreed or putting the in a manner that we find appropriate.
>> ok. how are the new bermuda-based startups affecting the way you do business today? i had a chance to speak ken la strange that runs endurance specialty holding a few months ago. he seemed very encouraged by the way people come on board with his company, because it doesn’t have the asbestos issues, the tobacco issues and the world trade center issues that face more long term insurance companies like your own.
>> we wish him luck. i would say that the amount of money raised by these new bermuda companies still relatively small relative to the amount of capital that was depleted from the industry by 2000 things; first of all the world trade center where we all estimate that $9-11, not world trade center specifically but $9.11 in general, we estimate the amount of capital destroyed by that at $40 billion worldwide.
>> with that kind of money lost do you need to boost your reserves.
>> we established our reserves for all of the 9-11 losses at that time. the other source of depletion was the great drop in the equity markets that has occurred over the last couple of years. that probably took $150 billion out of the industry. so maybe as much as $200 billion of capital has been destroyed in the last couple of years. so an additional or new $20 billion coming back into the market does not too much, does very little to replenish the capital.
>> my conversation with jack dubois, c.e.o. of swiss reamerica. stocks in asia were up on optimism of strengthening the u.s. economy will help exporters. coming up, a preview of asia market action.
