Insurers and reinsurers should charge higher premiums to recoup their losses following the World Trade Centre disaster, says International Underwriting Association (IUA) chairman Stephen Cane.
He said: "The loss is so huge, people have stopped underwriting or decided they do not want to continue in some areas. They should impose tighter conditions and terms. It might appear like they are taking advantage of circumstances, but this is a huge loss and companies cannot ignore what they have paid.
"They have lost a lot of capital and it will have an impact, so they should tighten up policy conditions and charge more money. They need to balance their sheets and rates will be going up accordingly."
Cane, who is also chief executive officer of Alea London, said the events on 11 September would force insurers and reinsurers to create new loss scenarios and rethink their modelling process.
"People felt they were being as prudent as they possibly could," he said. "But the World Trade Centre has proven there are things that can happen that you cannot imagine."
Cane said he would be sending a second letter to US National Association of Insurance Commissioners (NAIC) chairman John Oxendine if he had not heard from him by the end of this week.
Cane wrote to the NAIC two weeks ago requesting Company Market reinsurers be granted the same relief given to Lloyd's on the amount of money set aside to guarantee payment of claims.
"It is very important to get the same kind of treatment as Lloyd's," explained Cane.
"Company Market members are currently having to fund at 100%, so they are tying up funds that could be used elsewhere, which puts them at a disadvantage. Lloyd's has been allowed to allocate 60%.
"Having recognised there is a deficiency in the system, it should be corrected across the board."
Cane added recent events should not prevent the London Market speeding up on claims and administration processes through the introduction of the London Market Principles (LMP).
"We certainly want to continue the modernisation of the market," he said. "In February, the new slips get launched, but it is an ongoing process."
