The consequences of 11 September will prove far-reaching and complicated for the insurance industry. For once, the legal profession's much-maligned insurance sector is emerging as the one with much to gain from the horrendous attacks in New York.
In a profession not noted for its inherent glamour, insurance lawyers are a tin of tuna among the fruits de mer. Banking and corporate lawyers do the deals, grab the cash, steal the headlines and get the girls – while their insurance pals struggle under a mountain of paperwork and number underwriters among their friends. Life just isn't fair.
But every dog must have its day. Generally considered counter-cyclical, insurance lawyers were expecting to capitalise on an economic slowdown. Claims work and litigation are bolstered by a contracting economy, and every indication pointed at bad times generating good for insurance lawyers. And this was before the US terrorist attacks.
Indications are beginning to surface as to the nature and value of claims. The Lloyd's market will bear the brunt of the liabilities and insurance lawyers are at a premium.
It is, however, firms not renowned for their insurance capabilities that have initially come to the fore. Magic circle behemoths Allen & Overy and Freshfields Bruckhaus Deringer were both heavily involved in the emergency government intervention into the insurance market. Insurance firm Barlow Lyde & Gilbert has also surfaced as a key component of the negotiations, while little-mentioned aviation and insurance firm Beaumont and Son is now a name casually bandied about. Events have conspired to make this 20-partner niche practice centre stage. Beaumonts has quietly carved out a client list comprising almost every airline based outside the US, including companies specialising in transatlantic crossings – BA and Virgin.
Following the cessation of commercial cover for terrorism risks, all airlines were under threat of being grounded indefinitely. The insurance industry withdrew coverage in respect of war, terrorism and related perils and replaced it with third-party liability cover of $50m (£34m), but airlines need to arrange $750m (£510m) cover to resume business.
Most governments have simply agreed to third-party insurance guarantees. Kenya Airways secured an additional $750m (£510m) guarantees from its government, as did Taiwan's domestic airlines, but for only 30 days. Most governments are keen to plug the gap and then excuse themselves.
The approach taken by the UK Government differs as it is based on a model created to respond to the insurance industry's reluctance to cover certain buildings after IRA activity. For a limited period, a Treasury-funded specially formed company will supply replacement insurance for UK airlines. Should the cover need to be extended, airlines will have to pay premiums based on commercial rates.
A&O acted for a group of brokers comprising Aon, Marsh and Willis, while Freshfields advised the Government. Immediate reactions to the new arrangements were favourable. Now that their full import has been digested, some lawyers have intimated that the new policy contains some omissions.
It would seem that it provides for beneficiaries of existing insurance agreements prior to 17 September. If an airline acquires new aircraft they will not be covered. The policy does not provide for contractual obligations made after 18 September. Those engaging in sale leaseback transactions after that will not have the Treasury-backed top-up cover.
Airlines have suffered enormous losses since 11 September. Asset financing is one option for releasing needed capital. Sale and leaseback transactions are therefore an important source of equity. There is a problem if purchasers of aircraft are put into a financially difficult position as a result of missing the 17 September watershed for indemnity.
Insurance lawyers may finally be popular in the partner's dining room.