Bermuda insurers Ace and XL Capital are close to reaching an agreement with World Trade Centre lease holder Larry Silverstein, the Wall Street Journal reported yesterday.

The dispute concerning whether the attack on the World Trade Centre was one event or two has ended up in federal court and could be the difference between Mr. Silverstein and his group of investors collecting $3.55 billion or $7.1 billion in insurance claims.

The Wall Street Journal said that people - who were not named - that are familiar with the situation said the proposed settlement, which is expected to be finalised within weeks, calls for Ace Ltd. and XL Capital Ltd. to pay $365 million each to the Silverstein group.

But yesterday the Island offices of the insurers could throw little light on the report.

Ace spokesperson Wendy Davis Johnson said: "There is litigation pending between Ace and Mr. Silverstein and therefore we will not be making a comment."

An XL spokesman declined to comment to the Wall Street Journal and did not return calls made by The Royal Gazette yesterday.

The report says Mr. Silverstein is willing to accept a one-event interpretation with Ace and XL because he believes those carriers based their coverage on different documents to the 20 other insurers that provided the risk and casualty coverage for the property.

He is currently battling the other 20 companies in federal court, claiming the September 11 attack was two events.

The Silverstein group's coverage entitled him to collect as much as $3.55 billion per "occurrence" meaning that if there were two events, he would be able to collect $7.1 billion.

September 11 was just six weeks after the Silverstein group closed the deal to lease the World Trade Centre from owner, the Port Authority of New York and New Jersey for 99 years but insurance policies had not yet been finalised.

At the time of the attack only preliminary binder agreements were in effect, which were not as detailed as full insurance policies.

However, the policies Ace and XL had agreed upon included the wording originally proposed by London based Willis Group Holdings Ltd., the insurance broker for the deal, that defined "occurrence" as; "all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes".

The Wall Street Journal reported that the Silverstein group will likely settle on a one event basis and in exchange the two companies would agree to pay claims earlier than the Willis form specified.

A lawyer for the carrier with the most exposure, Swiss Reinsurance Co, told the Wall Street Journal that a potential settlement with Ace and XL undermines the credibility of the Silverstein group's claim.

However, the Silverstein group contends that Swiss Re and the other 19 carriers agreed to wording in a Travellers Indemnity Co. form that did not define "occurrence".

The Silverstein group believes the courts will rule in their favour that the attacks were two separate events.

The insurance payment will be a major determining factor in what is rebuilt on the 14 acre World Trade Centre site and how much control the Silverstein group has over the process. If the courts rule that the attack was one event, the group will not collect enough insurance proceeds to rebuild the amount of office and retail space that was lost, according to real-estate experts who spoke to The Wall Street Journal.