Aida World Congress 2006

AIDA WORLD CONGRESS 2006 INSURANCE, REINSURANCE AND THE IMPACT OF TERRORISM General Reporters: Professor Rob Merkin Professor Jerome Kullmann I THE QUESTIONNAIRE 1. MEANING OF TERRORISM (a) Is there any general definition of “terrorism”, “terrorist activity” or any related term in the general law within your jurisdiction? (b) If there is a definition, for what legal purposes is the definition relevant? 2. TERRORISM AND POLICY WORDINGS (a) To what extent do insurance and reinsurance policies written in your country exclude the liability of insurers and reinsurers for war risks? If so, is any distinction drawn between commercial and consumer contracts. Please answer this question on a class/sector by class/sector basis. (b) To what extent do insurance and reinsurance policies written in your country exclude the liability of insurers and reinsurers for terrorism risks? If so, is any distinction drawn between commercial and consumer contracts? Please answer this question on a class/sector by class/sector basis. (c) To what extent do war risks or exclusions and terrorism risks or exclusions or those for other acts of political or other violence such as malicious damage overlap? (d) Are there any market definitions of terrorism in use for insurance or reinsurance contracts? Please answer this question on class/sector by class/sector basis. If these have been introduced in response to recent developments how do these differ from previous provisions? (e) If there are policy restrictions on or exclusions of terrorism cover, when were these first introduced and have they been changed in the light of recent events? (f) More particularly, do any market definitions of terrorism require actual physical damage to be sustained and if so of any particular kind? (g) Upon whom falls the burden of proving any loss was caused by an act of terrorism? (h) Are rules of causation varied in relation to terrorism? In particular, does a terrorism exclusion operate when the loss is proximately caused by terrorism or is the exclusion narrower, eg, the loss has to be “solely and directly” caused by terrorism? 1 (i) Describe what, if any, significance is attributed to: the identity/identification of the perpetrator(s); their identification/association with recognised terrorist groups; the motive attributed to any act of terrorism (and whether this must be political, religious or ideological in nature); the modus operandi employed in perpetrating any act of terrorism; and/or the target of the physical act, ie those directly suffering loss and/or those (eg the Government) intended to be influenced? (j) To satisfy any definition or test of terrorism is there any dependence upon any Government, judicial or other form of certification or declaration of any kind? (k) Is there any specific reference, provision or known problem relating to acts involving biological, chemical, nuclear or other forms of contamination? (l) To the extent that terrorism risks are covered, do policies use aggregation provisions to limit insurance/reinsurance exposure and oblige insureds/reinsureds to bear retentions of any kind? 3. TERRORISM AND GOVERNMENT INTERVENTION (a) Does national legislation impose any restrictions on terrorism exclusions in insurance policies? If so, describe them and their application. (b) Does the Government provide any scheme whereby terrorism cover is made available to direct policy holders by the Government itself? If so, ple e outline the date of the introduction of the scheme, the nature of the scheme including any limits, deductibles and so forth, its original purpose, its success and funding arrangements. (c) Does the Government provide any scheme whereby terrorism reinsurance is made available to insurers by the Government itself? If so, please outline the date of the introduction of the scheme, the nature of the scheme including any limits, deductibles and so forth, its original purpose, its success and funding arrangements. 4. INTERNATIONAL OR CROSS-BORDER ARRANGEMENTS (a) Can you identify any international or cross-border schemes or initiatives whereby insurance or relief from financial consequences of acts of terrorism is guaranteed or supported for particular sectors, eg, aviation, shipping? (b) Are you aware of any international or cross-border initiatives or schemes which have been devised or developed since September 11 to protect insureds, insurers or reinsurers against exposure to terrorist activities? 5. DECIDED CASES OR OTHER RULINGS Have there been any court decisions or other rulings in your country in which the coverage of an insurance or reinsurance policy in respect of an act of terrorism has been considered? 2 II ANALYSIS 1. INTRODUCTION It was in London, in 2004, that the theme of terrorism and its impact on insurance and reinsurance was selected. Obviously, every member of the Presidential Council was thinking at the time of the September 11 attacks. The influence of current events on AIDA world congress themes is nothing new. One just has to take, for example, the theme of the 1990 Copenhagen congress, “Damage from international disasters in the light of tort and insurance law”, and to refer to the introductory remarks by AIDA's then-president, Mikael Rosenmejer: “the subject is highly topical and inspired by the Chernobyl disaster that took place in 1986”. As a matter of fact, current affairs affect not only the choice of world congress themes but also the actual content of the reports on the selected themes. So, while terrorism is a major concern nowadays, that was no always the case. The 1978 Madrid congress dealt with two themes, “Pollution and Insurance” and “Prevention and Insurance”: not a word was said about terrorism. Is it conceivable that a congress held in Madrid in 2006 would fail to address pollution resulting from acts of terrorism and the prevention of such acts? At the 1986 Budapest Congress, the theme relating to “Aggravation and other modifications of the risk situation” made no reference to terrorism. Today, terrorism would probably be addressed at least in relation to risk aggravation (how many insurance contracts, eg contracts covering major sports events, were cancelled for aggravation of risk following the September 11 attacks?). It is interesting to note that in 1990, disasters related to wars and warlike actions, which encompass terrorism, were expressly excluded from the aforementioned congress on international disasters. That exclusion would be difficult to justify now. And even going back to 1974, the year of the Lausanne World Congress devoted to “Insurance and acts of violence against a community, affecting persons or property”, the general report certainly gave a large place to acts of war, while stressing, however, “On the question of terrorism, the reports submitted generally remain silent, because of the scarcity of facts”. If that congress were held today, there is no doubt that the national reports would be far from silent on terrorism. Since then, there have been more than 20,000 acts of terrorism, 7,000 of which caused injury or death to persons, in more than 180 of the 200-odd countries in the world (“Scale Invariance in Global Terrorism”, Aaron Clauset and Maxwell Young, Dept. of Computer Science, University of New Mexico, April 2005). In short, although terrorism is a very old phenomenon, and terrorism risk insurance is not, in itself, a new concept, reaction to terrorism in not the same in 2006 as it was in 1974, when Professor Isaac Halperin stated: “The insurance of damages due to terrorism is not, or not much, taken in consideration in a specific way. Insurance laws and contracts stress on acts of war and sabotage” (General report, 4th AIDA Congress, 1974, Insurance and acts of violence against a community, affecting persons or property). 2. THE REPORT Early policies – and in particular the English Lloyd’s Marine Policy which was developed during the 18th century – did not distinguish between ordinary perils and war perils. The increasingly destructive effects of war produced reluctance on the part of insurers and reinsurers to issue cover against losses caused by war, based on both the potential extent of losses and on the risk of losses concentrated in particular places or at particular times. Over the years insurers have relaxed their attitudes towards the insurance of war risks, and it is now possible to obtain war risks cover for virtually all forms of policy, albeit in many cases at an increased premium or under a separate form of cover. The rapid growth of terrorism from the middle part of the twentieth century initially did not impact significantly on insurance or reinsurance, as the phenomenon was for the most part localised. However, in recent years, and particularly since September 11, 2001, the potentially destructive international power of terrorism has become all too apparent and has led to insurers and reinsurers refusing to provide cover against some or all risk of loss from terrorism. The AIDA Presidential Council determined that the response by the insurance industry (with or without government support) to the terrorist threat would form an appropriate and timely subject for discussion at the World Congress in Buenos Aires, as the topic is concerned with all forms of cover and affects all countries individually and collectively. A questionnaire was prepared in 2004 and circulated to AIDA’s National Chapters. Responses were received from: Argentina, Australia, Belgium, Brazil, Chile, Colombia, Denmark, Ecuador, France, Great Britain, Greece, Hungary, Israel, Italy, Japan, Mexico, South Africa, Spain, Uruguay and the United States. Grateful thanks are extended to the 3 National Chapters of each of those jurisdictions. Our gratitude is also due to Tim Hardy who provided invaluable assistance with the preparation of the questionnaire and to Yasmin Lilley and Paula Andrea Pérez Alcobé for providing English translations of material originally submitted in Spanish. 3. THE LEGAL DEFINITION OF TERRORISM International initiatives United Nations. The United Nations has been at the forefront of the fight against terrorism.

Load more