Before September 11, many analysts predicted the airline industry would enter a recession because several airlines were experiencing difficulties. Following the US horrors, the situation dramatically worsened and we are now seeing the grounding of aircraft, mass redundancies and financial cutbacks.

Latest estimates say £57bn has been wiped off the value of the world's airline fleets. For several national carriers such as Swissair, there is the distinct probability of collapse. The reasons are multiple, but severe increases in aircraft insurance coupled with lack of demand and increased security costs are the major reasons. The resultant collapse in the share value of these companies has meant that Ryanair, for example, is now worth more than British Airways.

Broad impact
The repercussions are huge. The travel industry is facing a bleak future - some people are reluctant to travel by air and certain former holiday destinations are becoming no-go areas. Already one major British holiday company, First Choice, is laying off staff and curtailing its programme. There will be a reduction in the demand for travel, holidays and insurance and this will knock back on the suppliers.

The adjusters descending on New York will initially be concentrating on trying to relocate displaced companies and help them back into business. To begin with, the cost burden to insurers will be on the business interruption (BI) side, with property claims following. However, the relocation problem will be enormous and insurers and adjusters will be faced with the same scenario facing the airline business.

In the same way people may be reluctant to fly, likewise they may not want to work in high-rise buildings. Companies fear the business risk and staff naturally have personal safety concerns.

The availability of low-rise accommodation is virtually non-existent in New York City for alternative relocation and already businesses are moving across the Hudson River to New Jersey.

The Twin Towers will not be rebuilt to anywhere near their previous height and it could take a year or more before any re-building programme is commenced, so it is unlikely these businesses will return to Manhattan. What effect this will have on New York as a business centre is anyone's guess.

With staff reluctant to work in high-rise offices, unaffected companies may also seek to relocate or employees may start to seek new jobs in less risky locations.

The US tragedy will raise questions as to how people escape from such buildings relying on internal staircases. Buildings that structurally rely mainly on the outer fabric and not an inner core, such as the Twin Towers, may become redundant and end up - like Ronan Point in London - being demolished.

Future design will have to be looked at afresh, with regard to the structure and additional external means of escape. New buildings may have to incorporate such concepts as gondola pods at various floor levels, which are not reliant on electricity, adopting the principles of the historic Davy Line systems that buildings in this country once had.

This scenario not only affects New York, but all city business centres and redevelopment schemes already in the pipeline. Are these new buildings likely to end up like Centre Point, with no interested tenants? The aftermath will affect the property development and construction industry.

Widespread liability
There will undoubtedly be considerable uninsured losses and the companies affected will, together with insurers (not just BI and material damage, but also probably life), be looking to recover. Liability claims are already being talked of, with the airlines and ground-handling service companies in the frame, along with air traffic controllers and even the government.

For many years in this country, bomb or terrorist damage in Northern Ireland was uninsured and was at the risk of the government.

No insurer was prepared to take the risk and it was the Northern Ireland Office that paid the claims. When the bombing came to the mainland, a not too dissimilar situation arose and Pool Re was created with the government being called upon.

There is already talk of the war risks exclusion being applied to the New York claims, particularly after the president declared the events of September 11 as acts of war. Will this lead to liability being attached to the US government?

The repercussions of September 11 will go beyond the terrible personal losses and material damage. As the consequences become known in the fullest sense, one can only speculate as to the long-term effect on the insurance industry.

  • Chris Miller is managing director of The Society of Claims Technicians.

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