Standard & Poor’s says that the direct financial losses relating to Tuesday’s terrorist attacks in the United States will likely exceed the largest insured losses ever yet seen.

“Any attempt to quantify the financial impact of the recent terrorist actions in the U.S. must be purely speculative until more information becomes available, which may take weeks,” said Steve Dreyer, managing director for U.S. Insurance Industry Ratings at Standard & Poor’s.

“But the insurance industry is strongly capitalized and can withstand an enormous financial hit without threat to the stability of the system overall.”

“While we cannot yet endorse a specific estimate, companies so far have acknowledged about US$4 billion in losses, a figure which will likely go much higher. Once insurable losses exceed US$10 billion or US$15 billion, we would expect to see a significant impact on balance sheets of individual insurers. However, the totals would have to exceed US$50 billion before we would begin to worry about the insurance system,” he said.

In comparison, Hurricane Andrew cost the industry approximately US$20 billion in today’s dollars and the 1993 World Trade Center bombing hit the insurance industry with under US$1 billion in losses.

Insurance losses from the latest tragedy are spread among many of the world’s largest and strongest insurers, such as Chubb Group, which has reported a maximum exposure of US$200 million for property claims, and Swiss Reinsurance Co., which has reported US$1 billion in expected claims.

The insurance coverages likely to be most affected include life, disability, workers compensation, health, business interruption, property, and general liability.

Standard & Poor’s will be in touch with insurers in the coming days/weeks and will assess the impact on individual insurers.

Total life insurance losses are expected to be in the low, single-digit billions of dollars, which is not likely to cripple the industry. There may also be some delays in payments on life insurance policies as the identification process is completed.

Standard & Poor’s confirmed that its insurer and reinsurer financial strength ratings already allow for near-term volatility caused by changes in the economic cycle and the periodic occurrence of major losses. Nonetheless, certain individual ratings may come under pressure in due course if claims and asset value reductions are found to compound existing weaknesses and lead to a permanent reduction in financial strength due to a seriously depleted capital base or loss of financial flexibility.