Year 2000 - Insurers to cut bug cover

Company directors who expect their commercial insurance to cover losses which result from millennium-related computer bugs received a nasty shock this week with the publication of new guidelines by the Association of British Insurers (ABI).

The ABI was due to release a set of draft clauses today that will exclude damage and losses caused by year 2000 computer crashes from commercial ?all-risk? commercial policies.

David Chitty, Chantrey Vellacott technical partner, expressed dissatisfaction with the ABI proposals. He said: ?It?s a matter of concern. Clearly, company directors have a duty to protect their assets.?

The move follows a study by solicitors Cameron McKenna to clarify legal uncertainties surrounding insurance cover and the year 2000.

An ABI spokeswoman commented that the association had ?absolutely no idea about the level of potential costs? and added that the millennium bug is not an unforeseen risk because ?we all know it?s going to happen?.

She continued: ?As things currently stand with standard policies, we don?t think it is something insurers can cover. It?s about upgrading your IT ? that?s not what insurance is for. Insurance isn?t an alternative to making yourself millennium-compliant.?

To soften the blow, the ABI is also issuing guidance to companies to help them deal with the year 2000 issue. Some companies may well be willing to cover against disruption, as long as policyholders have done all they can to make themselves millennium-compliant.

Robin Guenier, executive director of the government-backed Taskforce 2000 group, warned that premiums for currently available computer millennium insurance from companies such as Marshall McLellan and AIG start at around #1m and require extensive testing to show compliance. ?These are very dif^cult policies to get,? Guenier said. ?The only ones who can [obtain a policy] are the ones that don?t need it.?

The Taskforce 2000 director added that insurance such as ^re and personal liability cover may well be excluded as the insurance world grows more concerned with the millennium problem.

?If directors fail to take action, they could ^nd that either the law or the exclusion will get them ? they could be ruined.?