BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
LONDON -- What may be the first insurance policy designed to cover financial institutions' Year 2000-related losses is available from a syndicate at Lloyd's of London.
Steven Bensinger, chairman and chief executive of Archer Group Holdings P.L.C., which launched the product, said in a statement that he expects "significant interest and uptake of this particular cover, since the issue of millennium compliance is one which no business can ignore."
The Year 2000 problem, or "millennium bug," results from an inability of many computers to recognize the date change from 1999 to 2000 because a programming shortcut allows them to read only the last two digits of a year, meaning computers will think 00 means 1900.
The new coverage is written by syndicate 839, which Archer manages. Key risks covered under the policy, all of which can be tailored to the policyholder's needs, include:
The costs of getting computer systems up and running again if they crash as a consequence of failure to achieve Year 2000 compliance.
* The cost of redoing work that is flawed because Year 2000 computer systems went undetected. For example, if systems appear to be working normally when they are not, customer statements may contain errors that need to be corrected and resent.
* Losses incurred by the policyholder as a result of third parties whose systems are not Year 2000-compliant.
* Legal costs of pursuing claims against such third parties.
The coverage provides limits of up to L10 million ($16 million) and applies to the period Dec. 30, 1999, to March 15, 2000, in countries with sophisticated financial institutions and advanced information technology systems, such as the United States, European nations and Australia, the syndicate said. The premium for a standard indemnity period policy likely would be about 7.5% of limits but can vary based on policy design, according to a piece of promotional material for prospective clients.
The policy would not provide liability coverage for losses to a third party's system caused by failure of the policyholder's computer system to be Year 2000-compliant or coverage for loss of income or profits.
"This product is an attempt to provide our clients with the coverage that they need, rather than ignoring the problem and hoping existing traditional policies will respond," said William Knapman, financial institutions underwriter for syndicate 839.
He said discussions with financial institutions before marketing the coverage had produced "considerable interest."
Mr. Knapman believes the new policy will be of particular interest to banks, as they have a higher exposure to Year 2000 problems than many other financial institutions because they are so heavily dependent on their computer systems.
Interest in the coverage is likely to come mainly from medium-sized to large banks and lending institutions.
Less likely as clients are huge "blue chip" banking companies, not only because they already have spent hundreds of millions of dollars ensuring they are Year 2000-compliant, but also because the coverage limits would be too low for them.
However, Mr. Knapman said the product would be sold only to "well-managed" companies that have done their utmost to deal with the date change problem and that have highly centralized computer departments. Applicants must have successfully completed and implemented a Year 2000 compliance plan prior to the policy's inception date and must have "done everything they can reasonably do to correct their Year 2000 compliance problems," according to a the piece of promotional material.
Before an applicant is accepted, its Year 2000 compliance efforts must undergo examination by specialized consultants, which the syndicate says could help minimize directors and officers liability exposures.
Also, the number of policies sold would be strictly limited. Mr. Knapman said syndicate 839 probably would review its exposure after about 15 policies have been sold to determine if it should underwrite additional policies.
The policy was drafted with the assistance of London law firm Reynolds Porter Chamberlain, which specializes in insurance and professional liability law.
It is being launched at a time when most U.K. insurers are expected to introduce exclusions when commercial policies are next renewed. The Assn. of British Insurers had drafted model exclusion clauses covering business interruption, property damage, professional indemnity and product liability.
This month the ABI issued a memorandum to the House of Commons committee on Millennium Compliance repeating its view that it would be "commercial suicide" for insurers to offer blanket cover for Year 2000 risks.