Chapter 2 - Risks written in the London Market Flashcards
What is Agricultural crop and forestry/hail insurance? Main peril? And claims?
Include anything being farmed commercially as a crop e.g., wheat, fruit, tobacco and herbs.
Main peril: Loss of the crop primarily due to weather or disease
Claim: Loss of crop, through frost or hail, damage – common for tree fruit crops where hail at the wrong time of year destroys the buds and severely reduces the crop
What is Bloodstock and Livestock insurance? Main perils? And claims?
Bloodstock: covers racehorses and show-jumpers
Livestock: covers all animals (including fish) that can be reared commercially
Main perils: sickness/injury and total loss for the racehorses as well as loss of value. For livestock, it is important to insure loss by disease.
Claims: Racehorses have to be euthanised (put down) having been injured in a race. The payout will be the insured value of the racehorse. If a stallion, mare or bull fails to breed and turns out to be infertile, then their value drops dramatically and a claim can be made on that basis (depreciation, in effect).
What does Contingency insurance generally relate to?
Entertainment or sporting events
What is Concert or event cancellation/abandonment? And typical claims?
Contingency insurance covers the costs of refunding tickets and rearranging the event, if
possible, to try to recoup some of the costs
Claims: cancellation of one day’s play at the annual Wimbledon tennis championships, a cricket test match because of rain, or cancellation of a music concert because the artist became too unwell to perform.
What is Over redemption?
The value is outweighed by the cost if too many people claim the free gifts, causing them to use up all the extra profits
Insurers will consider the normal level of sales and add on a safety margin.
The insurance will be triggered if there is more redemption than expected.
What is Prize indemnity?
Insurance to cover the cost of a valuable prize if not donated
UW calculates the odds of the incident occurring
What areas are included in personal accident and health insurance?
Personal accident
Personal accident and illness/sickness
Kidnap and ransom (K&R)
What is personal accident insurance?
Covers insured against accidental injury usually subject to exclusions and disclosure of the insured’s hobbies
Benefits are paid weekly or monthly for an agreed period. If no improvement after the accident, then lump sums are payable by ‘permanent total disablement’
What is personal accident and illness/sickness?
Cover ‘sudden onset’ illnesses e.g., heart failure
Pre-existing conditions are generally excluded
What is kidnap and randsom?
Payment of the ransom itself if the insured is kidnapped
Policies can include the cost of medical and psychological treatment and pay their salary if held hostage
Includes payment for a team of hostage negotiators dedicated to handling the matters, liaising with family of the seized person, handling any payment of ransom
What is construction insurance?
Large construction projects with various contractors - Construction all risks (CAR)
Physical damage and liability policy
Contractors can be party to insurance as well as banks etc
Claims paid if policy falls within a number of exclusions
Policy period should match the contract period - point of materials for construction to start moving to site while they are being stored for prior use
Policy should terminate at point of completion - insurers work out whether they are on risk IRO work that has not been completed
Maintenance period - no longer than 12 months after handover/completion. Insurers cover if contractor has mainted contractual liability within the period
What is covered under the construction CAR policy (incl any maintenance period?)
Loss or damage to the building works;
Machinery movement (which covers machinery while being moved including some testing once installed);
Business interruption;
Public liability and employers’ liability; and
Damage to plant (machinery) which is used for installation or construction (whether that
the plant is owned by the insured or belonging to others).
What are extensions to cover that can be purchased under a CAR construction policy?
Cost of reconstructing plans
Breakdown or explosion of machinery
Expediting expenses - cover to pay for extra costs e.g., overtime or air freight charges for repairs/rebuiling following a loss or damage
What are normal exclusions under CAR construction policy?
- Defective design, materials or workmanship (only the defective element is excluded – any
consequential damage to other property is covered). - Existing property (i.e. what was on the site before construction began).
- Breakdown or explosion (see the extension that can be purchased for this).
- Anything for which the contractor is not liable under contract.
- Wear and tear or deterioration.
What are the key aspects for an insurer to consider with CAR Construction insurance?
- Experience of the contractor in the type of work being undertaken.
- The contracts that have been entered into by the contractor and the employer and the
contractor and their sub-contractors. - The contract value – therefore the sums insured. These policies have scope for increases
in the sums insured during the building period (such as inflation) and it is very important
that the insurer is kept advised of these amounts; otherwise the sums insured may not be
adequate to reinstate the damaged property. - Where and when the construction is taking place.
How can claims arise in a CAR construction policy?
- Injury claims because personnel fall off any part of the construction.
- Part of the construction sinks into the ground because of heavy rainfall.
- Parts of the structure do not fit together properly (this may possibly be excluded,
depending on the cause of the problem). - Collapse of equipment, such as a crane which will not only be damaged itself but can
cause damage to the construction project or people as a result of the collapse.
What is erection all risks (EAR) construction insurance?
Cover can be absorbed within a CAR policy but is often purchased
separately by the firms which provide cranes and/or those which are responsible for the
erection of any other steelwork, for example
EAR provides cover for loss or damage to owned equipment, as well as liability cover should the insured or their equipment cause any incident on-site (or on a site in the vicinity).
What is property insurance?
Covers physical damage only once building has been handed over to the owner
What are the three parts property insurance can be split into?
- Buildings: can vary from refineries and chemical plants through to shops and offices.
- Machinery: varies depending on the type of building but can include industrial machinery
and plant, fixtures and fittings, office equipment, computers and money. - Stock: can include raw materials, materials in the production process and finished stock
stored on-site
Is fire covered in an ‘all risks’ property policy?
Fire is actual ignition (flames) which is accidental or a fortuity.
– Note it can include damage caused while trying to put out the fire and damage to
property blown up trying to stop the fire spreading, as well as theft or weather related
losses following the fire.
– Fire is not a chemical reaction where there is no ignition, electrical arcing, charring or
scorching (where there is no fire). Additionally, if the fire is where it is supposed to be
(for example in a furnace) then this may not be covered.
– Underground fire must originate beneath the ground and have started naturally. In
other words, fires in basements or tunnels are not considered to be ‘underground’.
Is lightning covered in an ‘all risks’ property policy?
Yes
an electrical discharge which may or may not lead to a fire.
Is explosion covered in an ‘all risks’ property policy?
Yes, a violent release of energy which may or may not be connected to a fire.
An explosion can be caused by the release of some dusts. However, if an object bursts
through steam pressure alone this is not necessarily an explosion
Is an earthquake covered in an ‘all risks’ property policy?
Yes, i.e. pure earthquake, shake damage,
earthquake excluding any damage caused by subsequent fire, or fire damage following
an earthquake.
Can an aircraft be covered in an ‘all risks’ property policy?
Yes, this includes objects dropped out of or off aircraft, but excludes any
damage caused by sonic bangs (not so regular an occurrence now that Concorde no
longer operates).
