l20-spring 2011 module 11 l20: case study: wtc objective: review course material from perspective of...

L20-Spring 2011 Module 1 1

L20: Case Study: WTC

Objective: review course material from perspective of WTC destruction (911)


Basics about WTC• Owned by Port Authority of New York and New Jersey• Opened in April 4, 1973• 7 buildings in the complex


More Info.

WTC was made up of: Each Tower: – 200,000 tons of steel – 425,000 cubic yards of concrete – 43,600 windows – 12,000 miles of electric cables – Had its own zip code, 10048

– Had 110 floors – Was 50,000 sq ft (each floor) – Weighed 500,000 tons – Was 1,368 ft high (north tower) – Was 1,362 ft high (south tower) – Contained 198 miles of heating ducts – 97 elevators for passengers, 6 for freight


Tenants of WTC

• Banks• Financial services firms• Law firms• Brokerage houses• Television stations• Publishers• Charitable organizations• Airlines…


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


Support structure


Elevator system

• 198 elevators in total (Duplication-drawback?)• 200 deaths due to trapped in the elevators!


RM Objectives

• Objectives of the firm

• Objective of RM


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:


RM Problems -- Exposures


RM Problems -- Perils/hazards


RM Problems–Direct Loss

• Direct Loss


RM Problems–Financial Consequence


RM Tools-Loss Control Examples

• Following 1993 bombing, No mails can get to WTC w/o being checked elsewhere

• Evacuation plan• Tenants (backup data)


RM Tools--Loss Financing

• Retention

• Insurance– Primary insurance– Reinsurance


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.


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


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 ….


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?


RM Lessons Learned


Importance of monitoring

l20-spring 2011 module 11 l20: case study: wtc objective: review course material from perspective of...

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