Bermuda-based insurance company ACE Ltd, has said it will not invoke the act-of-war clause that would exempt it from making payments on claims arising from last week's terrorist attack on the US.

ACE now joins several other insurers who have made a similar commitment, including American International Group, Chubb Corp, St. Paul Cos., ING Americas and Hartford Financial Services Group Inc.

ACE has said that they expect $400 million worth of claims as a result of the terrorist attack.

Meanwhile, a Reuters report said that insurers are quietly preparing to lobby Congress for aid in the light of the massive pay-outs expected. It could come in the form of tax breaks.

The decision to pay claims comes as no surprise following Tuesday's statement by US law makers who told the insurance industry that any attempts to avoid paying out claims from last week's attacks by hijacked airliners under "acts of war" exclusions would be "unsupportable."

In a letter to the National Association of Insurance Commissioners, members of the House Financial Services Committee said most insurers had publicly pledged their co-operation, but concerns about denial of coverage still lingered.

"Any attempt to evade coverage obligations by either primary insurers or reinsurers based on such legal manoeuvring would not only be unsupportable and unpatriotic - it would tear at the faith of the American people in the insurance industry," the letter said.

Some leading US and European insurers have already said they do not consider the destruction of New York's World Trade Center towers last week an "act of war" and therefore the loss is covered under most insurance policies.

But US President George W. Bush has repeatedly called the September 11 attacks, that also involved an airliner striking the Pentagon near Washington, "an act of war".

Revised claims estimates are far in excess of initial figures and yesterday German-based Munich Re - the world's largest reinsurer - said that claims related to last week's terrorist attacks in the US could cut pre-tax profits by $1.95 billion, more than double its original estimate.

The German-based reinsurer warned that claims from the destruction of the World Trade Center could push this year's profits below those in 2000.

Its action was mirrored by rival Swiss Re, which also doubled its forecasts of the costs of the attacks.

Swiss Re had initially said claims would amount to $730 million, but are now quoting $1.2 billion as a more realistic figure.

Swiss Re said that since its initial estimate, further buildings had collapsed or were damaged. They also said the exact impact of last weeks attacks on their balance sheet was unclear as the final level of claims remains unknown and there was still the possibility of other large loss events later this year.

Munich Re said the events of last week would lead to a wholesale realignment of the reinsurance market alongside further improvement in rates and conditions.

Munich Re said on September 13 that claims from the WTC attack would be about $900 million, a forecast well below what many analysts had expected.

Munich Re also said their revision reflected extensive damage to buildings surrounding the WTC.

The estimated costs of total insurance claims resulting from the terrorist attacks have spiralled from an initial $20 billion and Fitch Inc. ratings agency said this week that property casualty losses should reach $30 billion or more, while life insurance losses could total $3 billion to $5 billion.

The agency cautioned that estimates of losses typically rise and that claims will be shared roughly equally by insurance and reinsurance companies.

The largest insurance loss to date involved Hurricane Andrew in 1992, which generated $16 billion in losses, or $19 billion adjusted for inflation, said Fitch managing director Keith Buckley. "If it winds up being $30 billion, it would be the largest catastrophic event the industry faced," Buckley said. "I think it's very likely to assume it will be the biggest."

Fitch officials said they expect to put 12 to 17 insurance and reinsurance companies on a rating watch in the coming days, including a few who will have their rating immediately downgraded. The others may or may not be downgraded later.

Meanwhile, Reuters reported that "insurance companies were quietly pressing the US Congress for tax relief in the aftermath of last week's devastating hijack attacks".

Their report continued: "Congressional sources said the legislation under consideration would remove hurdles to give some insurers a break on their income taxes by allowing them to use their losses in one subsidiary, such as property-casualty, to offset gains in another.

Since companies pay taxes on their gains, the shift could yield substantial tax savings - $1 billion or more over ten years, according to some estimates.

Experts say property-casualty insurance losses could add up to $30 billion. That would top the record $20 billion paid out for Hurricane Andrew, which devastated parts of Florida and Louisiana in 1992 - hitherto the industry's most expensive event.

American International Group Inc., the largest insurer of businesses in the United States, and Hartford Financial Services Group Inc., are among the companies that could benefit from the tax law changes, which industry groups have been seeking for years.

"Publicly, the companies are not asking for anything, but they are quiet on this issue," one congressional aide said yesterday.

Another aide said lobbyists were "working" the phones and sending out e-mails "almost instantly after" the September 11 attacks. He described their request as "particularly compelling" given the industry's exposure after hijackers rammed passenger jets into New York's World Trade Center and the Pentagon.

Congressional aides said the legislation may be wrapped into a broader stimulus package aimed at shoring up the US economy, badly shaken by the attacks. House and Senate leaders are expected to complete that package in the coming weeks.

*Several Bermuda insurance companies have had their credit ratings placed on credit watch with negative implications by Standard & Poor's as a result of last week's terrorist attacks on the World Trade Center.

S&P said it had placed the credit ratings of the Centre Solutions group and XL Capital on credit watch negative in the wake of the bombings.

In addition, S&P said several Bermuda-registered companies were potentially affected by the WTC catastrophe bit were already on Credit Watch negative. These were: Trenwick Group, which owns LaSalle Re, PXRE Group, Commercial Risk Reinsurance Co., Partner Re Group.

Several other giant insurers have also been placed on the list, including the Zurich Group, which also had its counterparty credit rating reduced from AA+/Neg to AA and its finanaicla s*trength rating reduced from AA+ to AA. Lloyd's of London had its financial strength rating reduced from A+ to A.

The Chubb Group, The Hartford Group, St. Paul Cos. were all placed on Credit Watch Negative, while CNA Group, PMA Group, Royal & Sun Alliance, Scor, Hannover Re, Liberty Mutual and Markel were all already ion Credit watch negative and are expected to be affected by the WTC catastrophe as well.

S&P said that insurers had accumulated net aggregate insured losses of $17.5 billion from the WTC catastrophe, but warned this was likely to rise significantly.

It added that total losses would javbe to exceed $50 billion for insurer's claims paying abilities to be compromised.