Would insurers give a clearer picture of the possible loss from the September 11 terrorist attacks in the US if they reported their exposures in gross, rather than net, terms? Morgan Stanley says yes. The US investment giant has released its second examination of the situation, and compared various estimates of losses.

Noting that Lloyd’s has reported a net loss of between $15.2 billion and $26.6 billion, the report compares this assessment with an earlier Lloyd’s report of a $2.8 billion net loss. Taking a few assumptions into account, it calculates the market expects to collect $12.2 billion from outside reinsurers.

Morgan Stanley says the net losses reported by the Continental European reinsurers as a group “do not appear to reflect the likely ceded losses implied by the net loss reported by Lloyd’s”, and suggests the situation could place considerable strain on some reinsurers.

“A substantial under-reporting of aggregate losses appears to exist,” Morgan Stanley said.

The report also acknowledges a column in the Australian newspaper on September 27, when commentator Mark Westfield called on QBE CEO Frank O’Halloran to reveal gross rather than net losses to the market.

Morgan Stanley also expresses doubts on insurers’ statements that their recoverables are collectible from reinsurers rated A or better. “In our view, ratings in force before the WTC attack are now largely irrelevant…”