L20: Case Study: WTC Objective: review course material from perspective of WTC destruction (911) L20-Spring 2011 Module 1

Basics about WTC Owned by Port Authority of New York and New Jersey Opened in April 4, 1973 7 buildings in the complex L20-Spring 2011 Module 1

More Info. L20-Spring 2011 Module 1

Tenants of WTC Banks Financial services firms Law firms Brokerage houses Television stations Publishers Charitable organizations Airlines… L20-Spring 2011 Module 1

Facts about 09/11/01 attack 8:46 am, a Boeing 767-200ER going about 470 miles per hour (756 kph)--fractured as many as 36 perimeter support columns over a four-story area of WTC 1's north face. 9:02 am, a second plane, a Boeing 767-200ER flying at about 590 miles per hour (950 kph), inflicted similar damage on WTC 2. The collision fractured as many as 32 perimeter columns over a five-story area Crash ignited plane’s fuel supply, causing fire at 2000 Fahrenheit L20-Spring 2011 Module 1

Support structure L20-Spring 2011 Module 1

Elevator system 198 elevators in total (Duplication-drawback?) 200 deaths due to trapped in the elevators! L20-Spring 2011 Module 1

RM Objectives Objectives of the firm Objective of RM L20-Spring 2011 Module 1

Statistics Total number killed in attacks (official figure as of 9/5/02): Tons of debris removed from site: Jobs lost in New York owing to the attacks: Point drop in the Dow Jones industrial average when the NYSE reopened: Estimated cost of cleanup: Economic loss to New York in month following the attacks: Estimated amount of insurance paid worldwide related to 9/11: L20-Spring 2011 Module 1

RM Problems -- Exposures L20-Spring 2011 Module 1

RM Problems -- Perils/hazards L20-Spring 2011 Module 1

RM Problems–Direct Loss L20-Spring 2011 Module 1

RM Problems–Financial Consequence L20-Spring 2011 Module 1

RM Tools-Loss Control Examples Following 1993 bombing, No mails can get to WTC w/o being checked elsewhere Evacuation plan Tenants (backup data) L20-Spring 2011 Module 1

RM Tools--Loss Financing Retention Insurance Primary insurance Reinsurance L20-Spring 2011 Module 1

More info on WTC insurance Port authority of NY leased to Silverstein just prior to the attack on 7/24/2001 (99-yr lease, 120m/yr) - Port Authority carried only $1.5 m (per occurrence) coverage $3.55 billion property insurance with a retention of only $1.5 million per occurrence (broker: Willis) 25 carriers including Chubb Corp., Swiss Re. (22%), Allianz AG, Ace Ltd. And XL Capital Ltd., Travelers Indemnity Co. L20-Spring 2011 Module 1

Questions about policy provisions—One or two occurrences “Occurrence” shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together… treated as one occurrence irrespective of the period of time or area over which such losses occur. In the first phase of litigation, 10 insurers won – a coordinated terrorist effort resulting in a single event In the second phase, Silverstein won, 9 insurers were judged liable for double limit – there were two separate attacks L20-Spring 2011 Module 1

Questions about policy provisions-- War exclusions Insurers will NOT pay for damage caused by: war, including undeclared or civil war warlike action by military force …. insurrection, rebellion, revolution …. L20-Spring 2011 Module 1

Questions about policy provisions-- Terrorism insurance Government program for terrorism insurance Terrorism Risk Insurance Act of 2002 (TRIA) Insurers must provide coverage for loss resulting from acts of terrorism 10 billion per insurer deductible, 90/10 after deductible Why have gov. program? L20-Spring 2011 Module 1

RM Lessons Learned L20-Spring 2011 Module 1

Importance of monitoring L20-Spring 2011 Module 1