IRMI Update—Issue #31
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
December 18, 2001
In This Issue
Colleague,
With year-end rapidly approaching, it is unclear whether Congress will enact
legislation to provide the insurance industry with a "backstop" in case of more
terrorist attacks. The House of Representatives passed a bill providing for
loans, which is not the industry's preference for a solution. But the Senate
has yet to vote on a bill at all.
Meanwhile some of my contacts have had December renewals quoted with terrorism
exclusions—even though the insurers don't necessarily have wording to show at
this time. I'm also being told that exclusions will be common in reinsurance
treaties beginning with January 1 renewals. Additionally, both ISO and AAIS
have filed terrorism exclusions with regulators—but we know of no approvals
thus far.
All of this converging simultaneously in a hardening market is going to make
for some very interesting and difficult insurance renewals in the coming weeks
and months.
What are you seeing in the marketplace? Are insurers insisting on terrorism
exclusions? Have you seen the exclusions they plan to use? Contact us. We will
share readers' experiences and thoughts in the next issue. [See reader comments and more reader comments.]
Happy holidays!
Jack
Jack P. Gibson
President
IRMI
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Make Sure Your Terrorism Exclusion Doesn't Apply to
Vandalism. The most likely problem most businesses would encounter from
having a terrorism exclusion on their property or liability policies is its
misapplication. After all, there is very little discernable difference between
an act of vandalism and terrorism. While it remains to be seen what the marketplace
will put forward, insurers should be willing to work with insureds to draft
exclusions that focus on the catastrophe terrorism exposure and minimize room
for overly expansive interpretations and unreasonable coverage denials.
The latest ISO terrorism exclusion filings make an attempt at this by establishing
a minimum threshold of aggregate property damage and (for the liability forms)
bodily injury that must be surpassed for the exclusion to apply under most circumstances.
To be considered a terrorist incident, the aggregate amount of property damage
to all property (not just insured property) must exceed $25 million, unless
the incident involves pathological, chemical, nuclear, or biological agents,
in which case there is no threshold. In the case of the liability exclusion,
a terrorist incident with less property damage but which seriously injures or
kills 50 or more people will also qualify.
This may not be a perfect solution to the problem for all insureds, but it
is certainly a better approach than a provision that excludes coverage for "acts
of terrorism" without qualification. If your insurer insists on adding an exclusion
to your policy, try to qualify its application to avoid having it used against
you when it shouldn't be.
We will be following developments in this area and would appreciate reader
input and copies of exclusions you encounter. Watch for articles summarizing
our research in early 2002. [See reader
responses].
By: Jack P. Gibson
President
International Risk Management Institute, Inc.
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. We'll
acknowledge your contribution.
There are now 232 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
-
Financial Lines—The
New ART Frontier—In this article, Brent Clark explains how the
blending of classic financial guarantee and surety markets with the alternative
risk transfer (ART) field is resulting in the creation of a market willing
to take a customized, problem-solving approach to unique risk financing
problems.
-
Three Management
Processes that Help Reduce Workers Compensation Cost—The involvement
of operations managers in the WC cost control effort is vital to its success.
Martin McGavin explains how utilizing measurement, cost allocation, and
providing management information can assure their involvement and an environment
where cost containment is an expected part of every operations manager's
job.
-
Initial Assessment
Site Assessments—In this article, Ron Prichard examines the questions
that need to be asked during an initial construction site assessment to
determine how the site is meeting both safety and development goals.
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Am I Adequately Prepared
To Sell?—What do you call a salesperson who gives such information-bound,
fact-packed presentations that he bores his prospects to death while ignoring
other prospects in the process? An Overpreparer, explains Frank Lee, an
expert in sales call reluctance, who discusses the problem and offers solutions.
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Military Leave Rights:
Obligations for Employers—The Uniformed Services Employment and
Reemployment Rights Act guarantees the rights of military service members
to take a leave of absence from their civilian jobs for active military
service and to return to their jobs with accrued seniority and other employment
protections. Paul Siegel provides the details.
Driving While Phoning—In
IRMI Update 23, subscribers were asked for their opinions on whether employers
should adopt policies for cell phone use during dangerous activities, particularly
driving. This article examines the responses, provides a bit of background,
and offers possible options for employers to take to confront the problem.
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