Year 2000 software glitch may cost insurers $35 billion, study saysgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Year 2000 software glitch may cost insurers $35 billion, study says
By Ted Hampton / Bloomberg News
NEW YORK -- U.S. insurers could have to pay as much as $35 billion in claims and litigation costs caused by the so-called Year 2000 computer bug, the actuarial firm Milliman & Robertson Inc. estimated.
"The country will experience numerous temporary business interruptions, and some (businesses) will fail" as computers confuse 2000 with 1900, Milliman & Robertson said in Best's Review, a trade magazine. Insurers "will undoubtedly be called upon to respond."
Insurers probably will lose "a significant number" of legal battles over whether policies cover losses caused by Y2K glitches, said authors Raja Bhagavatula and William Murphy.
The actuaries estimated insures' losses could be as low as $15 billion. They said their forecast excludes the most dire predictions for the transition to the next millennium, such as plane crashes, global power outages or a depression.
"If such scenarios come to pass, the losses could easily exceed $35 billion," Bhagavatula and Murphy wrote. Also, they point out that projections can soon be revised, because "Y2K incidents are expected to begin in earnest soon after 2000 begins and to continue throughout the year."
The threat of computer-related liabilities weighed on some property and casualty insurers' shares in recent months, investors say. "It is certainly a reason why we haven't gotten overly enthusiastic about the industry," said Timothy M. Ghriskey, a money manager at Dreyfus Corp.
The Standard & Poor's index of eight property and casualty insurers, including Chubb Corp. and St. Paul Cos., has declined 2 percent so far this quarter.
Still, if insured losses are $35 billion, that's only about 10 percent of insurers' reserves against outsized claims, said Keefe, Bruyette & Woods Inc. analyst Kenneth S. Zuckerberg.
"The property-casualty industry wouldn't be devastated," he said. "The good news is the problem is serious enough so a lot of (insured) companies have taken measures to get their systems Y2K compliant."
-- Linkmeister (email@example.com), June 22, 1999
Way down from that predicted trillion plus.
-- Paul Davis (firstname.lastname@example.org), June 22, 1999.
Don't confuse insurance with litigation.
-- regular (email@example.com), June 22, 1999.
Another article about this, including a breakdown of the figures, is at this link:
-- Linkmeister (firstname.lastname@example.org), June 22, 1999.