Royal & Sun warns on terror cover

Paul Armstrong12 April 2012

INSURERS are refusing to provide full cover to major commercial properties such as shopping centres following the 11 September terrorist attacks, leaving their owners liable for a substantial share of the bill for such a disaster, Royal & SunAlliance has warned.

Chief executive Bob Mendelsohn said premiums for big buildings which contained many people had doubled this year to reflect the huge risks insurers were accepting. He added that insurers were forcing property owners to take on much more of the risk by imposing higher excesses, meaning they could no longer protect themselves fully against the potentially-crippling cost of a terrorist attack.

These properties account for 5% of RSA's general insurance book. Mendelsohn said the January renewal season, when many US clients sign new contracts, had also seen rate rises of between 40% and 50% for mid-sized property and liability risks. The increases reflected the substantial supply-demand imbalance in the insurance market. 'Insurance companies had not been getting a proper price for the risks they were taking but in future they will be getting the right price and the right terms,' he said.

RSA posted an operating profit of just £16m in 2001, compared with £462m previously. The result was widely expected following last month's warning that it had provided another £384m to fund potential claims relating to asbestos diseases and for the cost of running down discontinued businesses. It has also made a £215m provision for costs stemming from the World Trade Centre attack.

But Mendelsohn said that even after deducting the WTC costs, RSA still missed its combined operating ratio, which measures premium income against claims, of 103%. 'I'm confident that in 2002 we will get that target because the policy terms and conditions are much, much better this year,' he said.

RSA was left with a £1.2bn pre-tax loss against a £29m loss previously, after taking an £845m charge relating to the impact of weak stock markets on its investment portfolio. The dividend is cut from 26p a share to 16p.

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in