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.]
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.
-
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.
-
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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