BI Remains Largest Segment of Total Estimated Insurance Loss
Claim Adjustments Continue to be Slow
Due to Complexity and Size of Claims
NEW YORK, Sept. 30 /PRNewswire/ -- In a report issued today,
PricewaterhouseCoopers announced that business interruption (BI) losses
associated with the September 11, 2001, events have risen from 25% to 30% of
total World Trade Center (WTC) loss estimates. BI coverage is written to
cover loss of gross earnings that result from interruption of, or interference
with, business and that are caused by loss of real or personal property.
BI coverage continues to represent the largest portion of WTC claims,
representing approximately 30 percent of the insurance industry's total
associated losses, up five percent from PricewaterhouseCoopers' initial
February 2002 estimate. Liability, property and life comprise the remainder
of overall insurance loss estimates. Total overall WTC loss estimates
continue to fluctuate but have been revised down from approximately
$70 billion to $40.2 billion. To date, approximately half of this amount has
been paid against the more than 33,000 September 11th related claims.
Complexity, Size and Calculation Methodology Slow Claims Process
The period of business interruption begins with the physical damage to
property insured and ends when damaged property is repaired, replaced and
operations resume as expected before the physical damage occurred. Some
policies provide coverage for an extended period of time beyond this for loss
of market share. Toward this end, the processing of business interruption
claims adjustments continues to be relatively slow, due in part to a number of
factors including size and complexity of evaluating the loss and coverage
provided.
"The exercise of calculating a BI loss is a difficult task under normal
circumstances," said Steve Kessler, Director within the PricewaterhouseCoopers
Insurance Claims practice. "What confounds the issue for September 11, 2001,
BI claims is the extent to which a distinction must be made, between a
policyholder's sales and revenues losses caused by the general economic impact
of the event itself, versus those caused solely by physical loss or damage."
Mr. Kessler noted that for some of the larger and more complex claims,
economists have been engaged by insurers and policyholders to help evaluate
overall claim and loss impact. Claims that are easier to measure and review
by the insurers are generally being paid out accordingly.
More specifically, the order in which September 11, 2001 claims are being
processed seems to be following a pattern based upon the ease of measurement
as follows:
1. Physical Damage Claims -- e.g., Assessment of overall scope of damage
2. Extra Expense (EE) Claims -- e.g., Temporary dislocation site lease
costs, purchase costs for temporary use of office equipment
3. Expenses Incurred that Averted BI Loss -- e.g., Expense incurred by
repair contractors to reduce the period of interruption
4. Low Limit Liability Loss -- e.g., Losses that far exceed policy limits
5. Overall BI Loss -- e.g., Determination of what the business
operations' level would have been had the loss or damage not occurred
PricewaterhouseCoopers' Dispute Analysis & Investigations team advises
companies and their counsel on forensic accounting and other fraud
investigations, and dispute analyses. Particular areas of expertise include
securities litigation, corporate investigations, intellectual property, and
construction and other contractual disputes.
PricewaterhouseCoopers (http://www.pwcglobal.com) is the world's largest
professional services organization. Drawing on the knowledge and skills of
more than 150,000 people in 150 countries, we help our clients solve complex
business problems and measurably enhance their ability to build value, manage
risk and improve performance in an Internet-enabled world.
PricewaterhouseCoopers refers to the member firms of the worldwide
PricewaterhouseCoopers organization.
SOURCE PricewaterhouseCoopers
 back to top
Related links:
http://www.pwcglobal.com
CONTACT:
Gerard Carney of Gavin Anderson & Company,
+1-212-515-1941, gcarney@gavinanderson.com, for
PricewaterhouseCoopers; or Hillary Ruben of
PricewaterhouseCoopers, +1-267-330-6808,
hillary.ruben@us.pwcglobal.com
|
