Many companies who have insured their employees’ lives may find they are not covered should they be affected by a 9/11-style terrorist attack, according to a recent global study
Many companies who have insured their employees’ lives may find they are not covered should they be affected by a 9/11-style terrorist attack, according to a recent global study.
Since the events of 11 September 2001, many insurers around the world have been reducing their war and terrorism exposure by the introduction of exclusions or single event limits which cap the overall claim value to single ‘events’
Research from Watson Wyatt has found one or more of the exclusions in half the policies the firm examined for employee life insurance, health and disability insurance from 47 countries.
“While some war and terrorist exclusions existed before the 9/11 catastrophe, the introduction of single event limits is a more recent development,” said Peter Eyre, a senior consultant at Watson Wyatt.
“These limits are designed to cap the overall claim value from an undefined single event, typically by a fixed monetary limit, but they may not be confined to war and terrorism.
“For instance the limitation could now extend to events such as natural calamities, earthquakes and flood, and to man made calamities such as building collapse and fire, and aircraft accidents.”
Employers may be left without the proper cover they had promised their employees should a disaster strike and this will leave the liability firmly on the balance sheet.
“While such single event monetary limits may seem quite high – typically ranging from £50 million ($119 million) to £100 million ($238 million) – the limits could soon be reached if either lots of employees or a group of senior employees were killed,” said Eyre.
War and terrorism exclusions have an even more profound effect. If it is on the policy there may be no payment at all and it’s quite common for the exclusion to apply even if the employee was the passive victim of an attack.
In countries other than the UK it may be that full war and terrorism exclusions exists, but the application is quite random, said Eyre.
Insurers have decided to limit their catastrophe liabilities in this way as a response to the combined pressures associated with reporting their potential maximum liabilities and negotiating their reinsurance contracts, Eyre said.
