A Warning On Tsunami Policy Endorsements

By Mark E. Ruquet

NU Online News Service, Feb. 4, 11:31 a.m. EST?The definition of a tsunami under an insurance policy can differ between carriers and regions of the world, and policyholders would be wise to review their contracts before assuming they are covered, a brokerage firm warned.[@@]

The caution came in a Willis Group Holdings report, which found that the Dec. 26, 2004 tsunami that struck South Asia and East Africa underscored not only the need for such coverage, but also the necessity to understand the terms of the coverage.

James H. Costner, a senior vice president for Willis Risk Solutions in Nashville, Tenn., part of the London-headquartered Willis group, who is author of the report, “Perspectives?Tsunami,” said that policyholders need to be aware that, generally, there are two interpretations for tsunami coverage.

The report said that in the U.S. the National Flood Insurance Plan, the Insurance Services Offices and the Factory Mutual Insurance Company “consider all forms of wave damage, including tsunamis and tidal waves, as flood losses.” Generally, the same terms are used by other U.S. insurers.

The second interpretation defines a tsunami by the causation of an event, be it earthquake, landslide, sudden collapse of land into the sea, collision of the earth with objects from space, or volcanic eruption.

Mr. Costner advised that it is essential for anyone interpreting the policies to understand how that language applies to a tsunami. It is especially important on large commercial accounts sharing U.S. and European insurers where a tsunami may fall under the definition of a flood on one policy, and fall under earthquake coverage on another.

These differing definitions can cause a significant problem over deductibles if there is a claim, he said.

“The only way to be safe is to have both coverages, and if [clients] have both they will be covered anywhere in the world, and they will probably be covered by a tsunami,” he noted.

One point he hopes the report makes to readers in the Western Hemisphere is that they are not immune to killer tsunamis. He noted that the report states there have been 1,101 tsunamis in this region in the past 100 years, and 89 have been killers taking more than 200,000 lives. The data was collected from the National Oceanic and Atmospherics Administration (NOAA).

Discussing the vulnerability of the United States to tsunamis, he noted that according to NOAA’s database, a tsunami that hit Louisiana in 1909 took 300 lives, and a 1918 event claimed 42 in Puerto Rico.

Killer tsunamis have also struck California, Alaska and Washington over the 100-year period.

Mr. Costner noted that the NOAA database also showed tsunamis hitting New England during that period, without loss of life.

The database revealed that there were two tsunami events striking Massachusetts in the past 100 years, one in 1929 and the other in 1938.

The full report is available at www.willis.com/Extras/Publications.aspx.