The Response from the Insurance Industry

by Dietrich von Frank

[Dr. Dietrich von Frank is President and Chief Executive Officer, AXA Art Insurance Corporation.]

As IFAR noted in its invitation, the attacks on the World Trade Center in New York, the Pentagon in Virginia, and the crash of the passenger plane in Pennsylvania were and still are a tragedy of epic proportions.

Like the two devastating world wars in the previous century, September 11, 2001 will remain a historic event for generations to come, especially for the United States, especially for New York.

Given the enormous human aspect of this tragedy, insurance and art related matters pretty much remained in the background, at least in the immediate aftermath of the attacks, and rightly so. Now, nearly six months later, as Ground Zero is being cleared possibly ahead of schedule, and tourists are flocking to the site in droves, the financial picture of the attack becomes somewhat clearer. Globally, $60-$70 billion in loss reserves are being put up by primary insurance carriers, reinsurance carriers, and other pooling arrangements to deal with insurance claims that range from property and casualty policies environmental insurance policies, business interruption insurance policies, life insurance policies, etc.

Now this is all probably confusing, because if you have an insurance policy, you deal with your insurance company or your insurance broker. There is a contract, and there is a limited dollar amount in the policy. When you have a loss, you basically deal with the insurance carrier. I am part of this primary insurance carrier league. We, in turn, are reinsured by large reinsurance companies, and these reinsurance companies again are reinsured, thus providing layers of risk. It all goes into an insurance pool, one global insurance pool that is financed by global investors.

Why are these $60 billion put up as a reserve? Because all of the insurance policies that were affected by the attacks share a finite reinsurance, a finite pool of liability. This has an impact on the financial markets, obviously, and vice versa; the financial markets have an impact on insurance capacity, which I will address.

My parent company, the AXA Group in Paris, estimates its share of the $60 billion to be around $550 million, predominantly through its AXA Reinsurance Company as well as its insurer of international commercial risks, AXA Corporate Solutions.

My company, the AXA Art Insurance Corporation here in the U.S., has put up $17.2 million to pay for the loss of three corporate collections that were destroyed when the towers fell. Amongst them, the corporate collections of Cantor Fitzgerald and Silverstein Properties, including the 'public' art works that Saul Wenegrat assembled specifically for the World Trade Center site:

• WTC Stabile (Bent Propeller) by Alexander Calder
• Sphere for Plaza Fountain by Fritz Koenig
• World Trade Center Tapestry by Joan Miró
• World Trade Center Fountain by Masayuki Nagare
• Sky Gate, New York by Louise Nevelson
• Ideogram by James Rosati
• Union by Lancelot Samson, and
• World Trade Center Memorial by Elyn Zimmerman, who is here tonight.

The collection owned by the trading company Cantor Fitzgerald predominantly contained drawings, casts, and sculptures by the French sculptor Auguste Rodin. Some of you may remember the photo in the New York Times depicting a bronze foot from one of the Rodin sculptures [The Three Shades] found in the rubble at the Fresh Kills Landfill on Staten Island. I was told that bits and pieces of other works of art are being found, but how important are such items in comparison to wedding rings, identification cards, engraved watches, etc. that symbolize the human tragedy behind, or rather, ahead of all these monetary losses?