The international insurance industry has reportedly been screening its existing terms and conditions for potentially ruinous risks and has identified certain weak points. In a new report, Swiss Re believes that one of the most perilous shortcomings in traditional property insurance and reinsurance concerns inadequate nuclear risk exclusions.
Even before Sept. 11, 2001, there was reportedly growing concern among property insurers and reinsurers regarding political risks, and the risk of terrorism in particular. International terrorism cannot yet be assessed precisely enough in terms of its frequency and severity, and the entirely new loss dimension experienced with Sept. 11, 2001 clearly demonstrated the limits of insurability to the entire insurance industry.
The reassessment of nuclear risks has brought to light certain gaps in property (re)insurance and revealed that the introduction of various national and private terrorism schemes has failed to improve the situation. The existing uncertainties and shortcomings in various markets and the necessity to exclude the nuclear risk entirely from property reinsurance have fuelled efforts to establish flawless exclusion clauses in the relevant treaties.
The new focus report “Nuclear risks in property insurance and limitations of insurability” authored by specialists from Swiss Re’s Chief Underwriting Office examines the current situation and proposes a specific agreement to eliminate gaps in reinsurance exclusions.
Even so, the authors argue that this is but a first step. Insurance wordings will have to be changed as well to exclude nuclear exposures. Ultimately, laws will have to be amended in some jurisdictions to correct the situation for the insurance industry. Swiss Re said it wants to work with its clients to press ahead with these necessary changes.
For more information on the report, log onto: www.swissre.com
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