S&P-WTC TRIAL WON’T ALTER RATINGS:

As the lawsuit over the amount of the recovery from destruction of World Trade Center’s twin towers plays out in Judge Michael Mukasey’s federal courtroom, Standard & Poor’s came up with another kind of verdict. The rating agency doesn’t anticipate any changes in ratings, even if Swiss Re and 12 other insurers lose the lawsuit pitting them against Silverstein Properties. S&P said that even in a worse-case scenario for the insurers, a verdict in favor of the Silverstein interests would result in a doubling of the original policy limits of $3.55 billion. Although the amount is obviously significant, S&P said it was “well spread across the insurance industry.” Silverstein’s insurance program consisted of a primary and 11 excess layers in which more than 20 insurers and Lloyd’s syndicates participated. Swiss Re, the largest participant, has about a 25 percent share, “therefore, a verdict against the insurers is not, in itself, a trigger for further downgrades.” S&P warned, however, that the legal process may go on for a long time. The lawsuit, which started trial Feb. 9, was first filed by Swiss Re in October 2001. The insurers involved have already budgeted the $3.55 billion limit per event for in their reserves following from agreements reached with their reinsurers. Although the sum is substantial, especially if it’s doubled, S&P called it a “relatively small part of the overall liability picture spawned by Sept. 11, 2001.” It pointed out that while only around 70 families have chosen to reject the federal settlement offer, there are still over $8 billion in unresolved business interruption claims. S&P noted that the industry had benefited in this instance from better modeling techniques to spread risk.