The world's insurance industry faces losses estimated at billions of dollars after Tuesday's terrorist attacks on New York and Washington, with one analyst predicting a "reinsurance meltdown".

The world's insurance industry faces losses estimated at billions of dollars after Tuesday's terrorist attacks on New York and Washington.

One analyst predicted a "reinsurance meltdown". As Insurance Times went to press, the major reinsurance and insurance companies, had suffered massive drops in stock values.

Reinsurers such as Zurich Re, Munich Re and Swiss Re saw progressive falls in their shareprices as the day's events unfolded. Swiss Re had plummeted 18.3% by close of business on Tuesday; Munich Re was down 16%, Zurich Financial Services share price fell from 428p to 362p.

French insurer Axa and financial services company Alexander Forbes suffered one of their worst ever trading days. Axa's share price fell to a recent low of 10 euros.

Alexander Forbes' share price dropped 140p to 1410p. CGNU dropped from a high of 932.5p to a period low of 763.5p. Royal & SunAlliance's share price dropped by 15.2%.

The World Trade Centre in New York, which collapsed after two hijacked planes – a 767 and a 757 – crashed into its two towers, housed a number of insurers and brokers. Aon, Marsh and Guy Carpenter had offices in the building. It is understood that Aon had seven floors above the 99th with 600 staff. Reports suggest that Aon was able to evacuate at least four to five floors before the tower collapsed.

Guy Carpenter had 1,000 staff in the building, though virtually all staff were evacuated after the first plane hit.

Richard Shaw of Credit Lyonnais said: "Reinsurers will be very adversely affected by today's events."

In Monte Carlo, the atmosphere was subdued. All parties were cancelled and Aon hired a hotel suite so its staff could watch the news updates. Senior vice president of International Co-operative and Mutual Insurance Federation (ICMIF) reinsurance division said: "It really makes you feel futile to discuss reinsurance terms. This is the only thing people are talking about in Monte Carlo. There will be billions of costs to the market. To put a figure on it - I don't think anyone can do that."

Lloyd's is the biggest insurer of war risks in the world - though most Lloyd's aviation insurers benefit because war risks are limited under an agreement dating back to 1937, agreed by the predecessor of today's ABI, the British Insurance Association.

Insurers are still awaiting news of the total costs and possible claims in the near future. From the events on Tuesday, it appears aviation, liability, travel, and business interruption will be hit hard. Most US policies cover terrorist incidents. All these have the potential to be catastrophic.