Terrorism Insurer Formed In Europe

London Editor

London

A Luxembourg-based company specializing in insuring propertyagainst acts of terrorism has been jointly founded by ZurichFinancial Services, XL Capital Ltd., Swiss Re, SCOR, Hannover Re,and Allianz.

The company, named Special Risk Insurance and ReinsuranceLuxembourg S.A., will be focused on European clients and will coveronly property damage. Business interruption and liability losseswill not be insured, said a company announcement.

SRIR, which has committed capital of 500 million euros ($440.4million, at current exchange rates), plans to start underwritingbusiness during the second quarter of 2002, subject to regulatoryapproval in Luxembourg.

Zurich Financial Services, XL Capital, Swiss Re, Hannover Re,and Allianz each hold stakes of 18.2 percent in the new company,while SCOR holds 9.1 percent.

A joint announcement from the shareholders said SRIR willfunction independently of its founders, with separate managementand underwriters operating from Luxembourg.

“The company is committed to controlling its risk accumulation,and has therefore adopted specific criteria to control and limitits exposure,” said the announcement. Indeed, the companies saidthat within any 600-meter radius from a covered property, the totalcoverage offered for the area will be limited to 275 million euros($242.2 million).

As an example, Claudia Stulten, a representative for ZFS,explained that if one building in an area is insured for 175million euros ($154.1 million), then coverage for another buildingwithin the 600-meter radius would be limited to 100 million euros($88.1 million).

“Sept. 11 made it very clear that the possible exposures fromterrorist acts are much, much higher than ever imagined by theindustry,” Ms. Stulten told National Underwriter. “As aresult, SRIR has to say, This is how much we can cover, but no morethan that. It could be that this wont be enough for a client, butthats as much as SRIR can offer,” she added.

“Its actually one of the reasons why SRIR is saying that it isimportant for state solutions to be developed, because privateindustry can only cover so much,” she said, noting that onlyFrance, Spain and the United Kingdom have developed state-sponsoredpools for terrorism in Europe.

“The establishment of SRIR signals the confidence of theinvestors in the development of workable private solutions to theprovision of terrorism cover,” said the joint announcement.“However, private solutions remain complementary to state-sponsoredschemes established prior to and since Sept. 11, 2001, and are notmeant to replace them.”

Ms. Stulten noted that SRIRs focus is on Europe, but “on aclient-to-client and case-by-case basis, it could be that it willoffer coverage for European customers that have subsidiarieslocated elsewhere.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, April 15, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.