I have been trying to understand how this will "unfold" for several years now. It has become clear to me that the key to understanding lies in understanding what will happen with business insurance. There appears to be no focus on this.

While some businessess self insure, many must have business insurance to operate. Examples: * Airlines ( I see the FAA has told the airlines they must have insurance to fly post Y2K.) * Chemical industry (UK millenium infrastructure project had a number of 20 Bhopal class disasters around the world floating a while ago) * Trucking * Legal requirements for insurance for corporate officers for stocks to be traded (seen a reference to this - don't know much more)

Articles keep cropping up that insurers are trying to do things to avoid liability, but it hasn't had impact yet, but it will before Y2K. Business insurers limit their liability by buying REINSURANCE. Business insurance and reinsurance runs generally from beginning of calendar year to beginning of calendar year.

Imagine the insurance business this fall. Your local business insurance company goes to the reinsurance company and gets told "we have this new 'no y2k liability clause' or 'we'll cover Y2K if you've done due diligence and all mission critical systems are done, but it will cost 20 times as much.'" The your airline or trucking company or ... tries to renew their policy for 1 Jan 00 and gets the same bad news.

In this scenario, the insurance companies are not "the bad guys", they have to protect themselves and their owners just like everyone else - they are just the agents of change.

It's ironic, the first Y2K project I heard of 7 years ago was in an insurance company they were working hard at it (and are still not done).

-- noel goyette (ngoyette@csc.com), April 27, 1999

Answers

I'm not aware that the chemical industry *has* to have insurance to operate. However, I think that lenders will drive much of the need for insurance, to protect their own investments (for instance, of chemical companies).

-- Brooks (brooksbie@hotmail.com), April 27, 1999.

On a related note: (From the world of "The U.S. says it's o.k., but we're worried about sure about you over there. . .)

(Snip)

German insurer sees Y2K boosting insolvencies

FRANKFURT, April 26 (Reuters) - Germany's third-largest credit insurer company Allgemeine Kreditversicherung AG (AKV) said on Monday it expected the millenium computer bug to drive up company insolvencies.

"There will be a whole range of companies which won't make it beyond year 2000," AKV chief executive Hellmut Meyer-Giesow told a news conference.

He said AKV for the last two years had been assessing possible risks and had raised substantially its risk provisions, but it was impossible yet to calculate losses that could emerge as a result of the problem.

-- FM (vidprof@aol.com), April 27, 1999.

I keep trying to find out something on medical malpractice insurance. I think if something happens here and it makes it to the public attention then it really will hit the fan. You know the hospitals are like Russia and the Dr. won't perform emergency by-pass or deliver a baby for fear of lawsuits cause his insurer won't cover because remediation wasn't finished or whatever. Boy if this ever becomes a story it will really make awareness take off!

-- Johnny (jljtm@bellsouth.net), April 27, 1999.

This is the only article that make the front page of the local paper. It is Canadian but not a leap of faith to think it may apply in the US to some extent

Insurance companies limiting Y2K coverage

 http://www.globetechnology.com/gam/Y2K/19990419/ UINSUM.html

Monday, April 19, 1999http:// www.globetechnology.com/gam/Y2K/19990419/UINSUM.html
MICHAEL MACDONALD
Canadian Press

Toronto -- Some of Canada's insurance companies have begun altering policies to limit coverage for damage caused by the millennium bug, industry experts warn.

"They're sending out letters with renewals that say there's no intention to cover year-2000 issues," said Art Despard, senior vice-president at Aon Reed Stenhouse, Canada's largest insurance broker.

"They're taking off things that I really don't think should be taken off."

As a result, hundreds of Canadian companies have already switched insurers because of a growing list of so-called date-recognition exclusions on property and liability coverage, he added.

"We've moved a book of business away from some companies because of it," said Mr. Despard, noting the value of those policies recently topped $10-million.

However, he stressed that most of the policy changes, usually referred to as "clarifications," have been introduced by about a dozen small insurance companies.

The Insurance Bureau of Canada, the trade association that represents property and casualty insurers, insists the clarifications merely explain that losses resulting directly from Y2K glitches have never been covered.

In other words, if a computer or coffee maker is killed by the millennium bug on Jan. 1, insurance won't cover the loss because Y2K is not considered a sudden and unexpected event.

"The onus is really on the owners of the property to ensure they have met all requirements and that their property is going to stand up to the Y2K event," said Lindsay Olson, vice- president of the bureau's Pacific region.

But what if a Y2K glitch at a power plant causes a electrical surge that fries home appliances? That's called consequential or indirect damage and it should be covered by most policies.

The problem is that some insurance companies have introduced Y2K exclusions that are too broad in scope, said Mary Jane Stitt, an insurance expert at one of Canada's largest law firms.

"This type of exclusion . . . appears to be eliminating coverage for something that, arguably, may have been covered before," she said.

Ms. Stitt, part of a Y2K legal team at Blake, Cassels & Graydon in Toronto, said exclusions can vary from policy to policy, which means that interpreting such clauses can be tough.

-- Brian (imager@ampsc.com), April 27, 1999.