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A Ruinous Day for Insurers

The World Trade Center losses could bankrupt some

When Hurricane Andrew ripped through South Florida in August, 1992, it was a sobering reminder of the human and the financial price Mother Nature could exact. Now Andrew has a ghastly rival. As people registered the shock of Tuesday's destruction in New York and Washington, whispers began within insurance circles that the attacks might cost insurers as much as $30 billion. Until now, Andrew's $16 billion tab was the most expensive U.S. insurance event ever. "This is catastrophic beyond anything we've ever seen in the U.S.," says Jason B. Adkins, a partner in Adkins, Kelston & Zavez, a Boston law firm that specializes in insurance litigation.

The insurance bill will surpass the record for a man-made catastrophe, the $775 million loss from the Los Angeles riots, also in '92. Certainly, the insurers in this case have spread their risk. "Insurers don't even insure an aircraft alone," says Robert P. Hartwig, chief economist at the Insurance Information Institute in New York. The American Insurance Assn., a trade association of large commercial insurers, expects that almost all of the major U.S. companies will have some losses. Industry experts estimate that hundreds of insurers around the globe share the risk in this case, though it's unclear whether, after the 1993 bombing of the World Trade Center that cost insurers $510 million, the new policies covered terrorism differently from other risks.