WTC 9/11 Insurance Losses

Second to asbestos related claims, the WTC 9/11 incident is by far the biggest man made loss in the modern insurance industry history. The loss to the industry from this incident is now about US$ 50 billion from a multitude of different insurance classes and products.

About 25% of the overall loss came from the property losses to WTC 1, WTC 2 and surrounding properties. Another 25% came from business interruption (loss of profit) insurance, 25% came from liability related insurance products and the remainder came from a variety of insurance products such as workers compensation, aviation liability, event cancellations etc. Life insurance also contributed at about 7% of these remaining losses.

What was wrong in the insurance industry in relation to the WTC losses is again what we term as being the islamic insurance Gharar factor. In this particularly Gharar or uncertainty appears in an insurance industry scenario as being the Estimated Maximum Losses (EML) of the risk. The size of the loss that finally affected the WTC 9/11 incident was away beyond any industry players expectation or calculation for a single event occurence based on the EML that was produced before hand.

The involvement of so many multi-line insurance products that were affected by the incident exacerbated the situation to levels previously not calculated. Further more the Gharar on the policy coverage and event definition has a potention dispute, that when resolved, has the potentional to produce even higher losses to the insurance industry. Up until this article going into online, and is foreseen to contine for years to come, litigations are still raging in court whether the WTC incident constitutes as being one or two events.