Insurers are continuing to increase the estimates of their losses from the terrorist attacks on September 11. The announced costs, which are typically net figures and include income from reinstatement premiums and money recovered from reinsurers, total more than £11bn.
Royal & SunAlliance last week (October 11) increased its forecast by £50m, raising it from £150m to £200m. Its first estimate was issued four days after the destruction of the World Trade Centre. The update was based on more detailed information about clients' losses received since then, it said.
The world's biggest insurer, AIG, showed it was not immune to the forces affecting smaller players when it revised its forecast of losses upwards from $500m (£344m) to $800m (£550m).
The group, which deals with primary insurance and reinsurance, expects claims to pour in from many types of exposures, although it believes costs from property-related claims will be relatively minor.
At the same time, AIG is being hit by expenses totalling $2.3bn (£1.6bn). These come from costs of $1.4bn (£940m) associated with its purchase this year of American General Corporation and a charge of $125m ($86.2m) to write off investments.
AIG chief executive Maurice Greenberg says the US government is likely to save the insurance industry hundreds of millions of dollars in court costs by designating a single court to consider claims related to the September 11 attacks. He adds: "If we have another event or two, we'll see some companies broke in the industry. There is going to be a need for a reinsurer of last resort."
Zurich Financial Services has doubled its forecast of its losses from $400m (£271m) to between $700m (£475m) and $900m (£611m). At the same time, the company abandoned its 2001 profit target. The combined effect was enough to cause the company's shares to fall sharply in value, although they later regained the lost ground.
Lloyd's of London opted to wait a fortnight before publishing its figure of £1.3bn, rather than rushing out a figure it might have had to revise, but was still soon accused of underestimating its losses.
Ratings agency Fitch said it believed costs to the Lloyd's Market would total at least £1.7bn.
The first two preliminary estimates were produced by Munich Re and Swiss Re and both were later forced to increase their figures. Munich Re, the largest reinsurer in the world, at first expected to lose £623m, but later increased its forecast to £1.3bn. Swiss Re initially said the attacks would cost it £483m, but later increased its estimate to equal that of Munich Re.
Fitch insurance analyst David Wharrier says companies are under pressure to announce loss figures quickly after the disaster, simply in order to quell damaging market speculation, even if they know they will have to revise their figures.
He says: "Listed companies were under pressure to come out and say something more quickly because their share prices were lowered very quickly after September 11. Otherwise, the rumours of what their exposures could be might have had a long-term effect on their share price."
The largest single loss figure announced so far has come from Berkshire Hathaway.
The US financial giant expects the terrorism attacks to cost it $2.2bn (£1.52bn). Chief executive Warren Buffett says: "We've labelled this a `guess' because that's all it is. It will be many years before we can tell the world within a narrow range what the true figure was.
"A very high percentage of the loss occurred in our US insurance companies, with the balance in German and UK entities. Because we have regularly paid very large amounts of US income taxes, we will bear 65% of the cost applicable to the US operations; the government will bear 35%.
"Many insurers will not have their losses mitigated in this manner and some may not survive. Though much of our loss will be paid very soon, significant payments in the liability area will take a considerable time to settle."
UK insurer Welling-ton Underwriting nearly doubled its forecast of losses on October 4, increasing its figure from £30m to £50m.