(FORTUNE Magazine) – For insurers, the only certain outcome of the World Trade Center catastrophe will be massive claims, endless litigation--and a price tag that could reach $30 billion, a number that would far exceed the $16.8 billion record set by 1992's Hurricane Andrew. That disaster caused the temporary insolvency of State Farm Fire & Casualty and the demise of a dozen smaller insurers.

No major meltdowns are expected this time, says Matthew Mosher of the A.M. Best insurance rating firm. That's because Andrew's staggering losses prompted the industry to rethink how it spreads risk among so-called primary insurers (outfits like State Farm) and reinsurers (such as Lloyd's of London), which provide extra coverage for big losses. These days, for example, reinsurers employ sophisticated computer models to predict payouts and avoid covering more than they can handle.

That will help scores of insurers cope with Trade Center-related claims on policies that cover life, property, workers' compensation, and business interruption, not to mention the liability claims that airlines, airports, and the buildings' landlords may have to face. Despite the size of potential claims, consultant Charles Kline predicts an insurance impact no worse than "a blow to the stomach that makes you say 'Oof.'"

That said, sorting out losses and liability will be complex, expensive, and time consuming. (The task may be hampered by the fact that two of the largest insurance brokers, AON and Marsh & McLennan, had offices in the World Trade Center.) Courts and arbitrators will end up resolving many claims. "They'll be arguing for years over questions of coverage and liability," says Berkshire Hathaway Chairman Warren Buffett. Berkshire owns insurance operations that expect to shoulder 3% to 5% of the industry's total losses.

One giant wild card: business interruption claims. With numerous buildings either in danger of collapse, exposed to debris, or inaccessible due to the cleanup, Morgan Stanley insurance analyst Alice Schroeder estimates these claims alone might total $5 billion. Workers' comp claims from the estates of those killed could also balloon. These claims, which are not capped in New York, could average $500,000 each.

Some believe that United Airlines and American Airlines, whose planes were hijacked and used as missiles, could face huge liability. Schroeder expects the airlines will "significantly exceed" their insurance coverage (generally $1.5 billion to $2 billion per plane). At press time, American and United had already begun lobbying for immunity from negligence and wrongful-death suits stemming from the hijackings.

Experts say most policies held by World Trade Center occupants cover terrorism. Many, though, exclude damage caused by war. But although President Bush may be proclaiming these attacks "acts of war," courts have generally found that war exclusion clauses do not apply to terrorism, says Charles Fortune, an insurance attorney at Day Berry & Howard.

For now, insurers will reassess how they cover major office buildings. Rates will increase, and prices for reinsurance policies that cover terrorist attacks will rise sharply. Some skittish insurers may even stop writing such policies, shrinking the supply just when demand is likely to soar. Others will see an opportunity and begin selling high-priced policies specifically designed to cover terrorism, just as many tried to sell policies tailored for potential Y2K losses.

Ultimately, even a $30 billion payout may barely scratch an industry with a $300 billion capital base--unless another calamity strikes in the next year.

--Jeremy Kahn and David Stipp