More than five months after Sept. 11, hundreds of U.S. companies and their insurers are still trying to resolve how much is owed for damages suffered as a result of the terrorist attacks on the World Trade Center and the Pentagon.

Some estimates now suggest that the attacks produced insurance losses of between $60 billion and $70 billion, the single largest insurance loss in history.

While insurance claims covering the destruction of the World Trade Center's twin towers could alone total as much as $7 billion, it is business interruption damages, and not property damages, that account for the greatest portion of the losses, according to a report released last week by accounting firm PricewaterhouseCoopers. The business interruption claims are also the stickiest to settle.

Early forecasts of business interruption losses began in the $3.5 billion range, but they're now estimated to come to at least 25% of total insurable losses, or between $15 billion and $18 billion, according to the report. By comparison, property claims could account for 22% of total insurance losses; aviation and other liabilities claims make up another 22%; life insurance claims 16% and workers' compensation claims come to about 10%.

To get a better picture of how the business interruption claims are being resolved, spoke with the authors of the report, Michael Markman, partner in charge of insurance claims services for PricewaterhouseCoopers U.S., and Steve Kessler, director of insurance claims services in the New York office of PricewaterhouseCoopers.

TSC: What exactly does business interruption insurance cover?

Steve Kessler: It's essentially designed to reimburse a policyholder for business lost due to a damaging event. As it relates to the World Trade Center, the most straightforward example is a business that was located within one of the towers. That property suffers physical damage that prevents it from doing business, resulting in a direct hit on its revenue stream that can't be made up. The examples get more esoteric as you get more remote from Ground Zero.

Michael Markman: Right. At the other end of the spectrum is contingent business interruption, which covers companies that did not sustain any physical damage, that were not located at Ground Zero. These policyholders might do business with companies that did have a loss or were located at Ground Zero. These claims can also be very substantial.

Kessler: For large commercial clients, certainly the Fortune 1000 companies, you would expect to find this kind of coverage in all of their policies. You might not find it in policies held by a restaurant owner in New York, however. But any policyholder that has a broker to assist him when putting the policy together would generally have this kind of coverage.

TSC: Aside from the airlines and financial institutions, which industries have been hardest hit in terms of business interruption as a result of Sept. 11?

Markman: One industry that people don't think of as having been terribly hard hit is media and communications.

Kessler: Yes, many of the media companies -- television and radio -- had antennas at the top of the World Trade Center. As a result of losing these antennas, their reach was reduced and advertising revenues fell. Also, many media companies went to 96 straight hours of television broadcast and so forwent lots of advertising revenue. That's what they're wrestling over, how much of that is covered, and so forth.

TSC: How will the losses of Sept. 11 be different from the losses created by a weak economy?

Kessler: This event happened at a time when the country was going into a recession, and the magnitude of the event was so large that it fueled that recession. Insurance companies are looking at the experience of these businesses before the loss and damage, and the probable experience after the event. You have to determine seasonality factors. For example, broker-dealers tend to have busier quarters in the fourth quarter because folks are getting their portfolios in order for the end of the year. If revenues were already trending down, that needs to be considered in the settlement of these claims.

For some businesses, particularly those in the broker business, their business might have actually gone up after the market opened, because trading volumes rose following a four-day closure of trading on the New York Stock Exchange and the Nasdaq as a result of the attacks . So one might think, maybe they've benefited from an increase in business after the event. The question is, to what extent do you need to consider any excess of revenues received afterward as a makeup for any loss that may have occurred during the four days that the market was closed following the World Trade Center attack.

TSC: How big are some of these business interruption claims?

Kessler: It comes to hundreds of millions of dollars for some of the larger tenants in the World Trade Center. The owners of the World Trade Center probably saw business interruption losses in the billions of dollars. But it's all over the map.

TSC: Do government aid packages, like the Airline Stabilization Act, have any impact on a company's ability to present business interruption claims?

Markman: The Airline Stabilization Act would help mitigate the business interruption losses sustained by the airlines. It doesn't preclude the airlines from filing business interruption claims. Clearly, to the extent that you get recovery from one source, you can't double dip. But the airlines are still putting their claims together with the government. There's still a lot unknown there.

TSC: How long will it take to resolve some of these claims?

Kessler: I'm dealing with at least one claim that is just about ready to be settled because the limit on the client's insurance policy was approximately equal to the loss. This company was a tenant in the World Trade Center, so it was relatively straightforward. There are other businesses whose claims are so complex that it will probably take another couple of months before the size of the loss is determined. Then there is the question of continuing losses, which could take several years to evaluate. And some of these issues could be litigated, so there it would be up to the courts.

TSC: How might insurance companies change their business interruption coverage after Sept. 11?

Kessler: The terms and conditions are narrowing significantly, while the costs are going up. Contingent business interruption insurance usually is capped, maybe at $50 million or $10 million, and those limits are coming down. The language is also becoming more restrictive. Insurance companies are using renewals to tighten up their language.

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