Re: "Insurance: Companies make a bomb out of the millennium"
Note: This comes from ft.com, a free site that requires registration. Therefore, for convenience, I've posted the article, which appeared on the front page of the print version of the newspaper, here.
WEDNESDAY SEPTEMBER 3 1997
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By Christopher Adams, Insurance Correspondent, Financial Times
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Insurers offering coverage against the "millennium bomb" are demanding that customers pay huge fees upfront to specially appointed consultants.
Companies are being charged up to $365,000 (œ227,000), most of which cannot be recovered later, for an audit of their systems before receiving insurance cover.
Some potential buyers have to pay tens of thousands of dollars just to get a quote. If they decide not to buy insurance, the downpayment is not refunded.
A few US-based insurers and brokers have begun selling policies specifically protecting companies against financial loss should their computers fail to recognise the year 2000.
Commercial insurance buyers at big companies said yesterday that the initial fees on such policies were generally much higher than those charged for any other type of insurance risk, including pollution cover.
They added that the downpayments would deter many companies from purchasing the insurance. According to the buyers, existing insurance cover should protect most big companies against the millennium bomb.
The millennium bomb is a legacy from the early days of computing, when years were stored in programs as two digits rather than four. Come the turn of the century, many machines will be unable to distinguish between 1900 and 2000 since both years are stored as 00, leading to potentially catastrophic results.
Interest in the new insurance policies has so far been almost non-existent. Nobody has yet bought one and only a handful of companies are undergoing the audits required by insurers.
The US insurers and brokers offering millennium bomb cover include some of the country's biggest: AIG, J&H Marsh & McLennan, and Aon. The insurance on offer typically covers business interruption as well as professional and general liability. Premium rates are high and limits on coverage vary according to the policy, but can be as much as $500m.
The Association of Insurance and Risk Managers, a London-based group representing commercial insurance buyers, described the costs as "remarkably high". |
