Chapter 2a - Non- marine Risks Written In The London Market Flashcards
Non-marine classes of business
Physical Damage:
- Agricultural crop and forestry/hail
- Bloodstock/livestock
- Contingency
- Personal accident and health
- Property including onshore energy
- Business interruption
- Homeowners
Non-marine liability:
- Directors and Officers
- Errors and Omissions/Professional indemnity/Professional negligence and Med Mal
- Public liability
- Products liability
- Employers liability
- General liability/comprehensive general liability
Non-marine other:
- Financial guarantee
- Extortion/malicious product tamper/contamination
- Product recall
- War
- Terrorism and political violence
- Cyber
- Mergers and acquisitions
Aviation classes of business
Physical damage:
- Physical damage to aircraft
- Property insurance for airport buildings
- Drone/unmanned aerial vehicle
Liability:
- Airline liability
Other aviation:
- Aviation war
- Loss of licence
- Loss of use
- Aviation repossession
- Contingent hull, liability, or war
- Space
Marine classes of business
Physical damage:
- Vessels
- Cargo
- Offshore energy
Marine liability:
- Shipowners liability
- Professional negligence
- Ports liability
Other types of marine cover:
- Loss of hire/earnings
- Specie/jewellers block
- Fine art
- Cash in transit
- Political risks
- Contract frustration or trade credit
- Bond risks
Motor insurance
Standard motor written by composite insurers and specialist insurers
Some motor written in London Market
Overseas motor also written, split into:
EU/EEA
USA/Canada
Rest of world
Physical damage and liability covered
Innocent victim must be protected - insurers can’t always rely on insurance law due to this, so must fully understand nature of risk before agreeing to cover it.
LM uses delegated underwriting contracts
Agricultural crop and forestry/hail insurance
Crops farmed commercially
- main peril is loss of crop
- hazard is weather or disease
Eg. Loss of crop through hail or frost damage
Bloodstock/livestock insurance
Bloodstock: Covers racehorses and show jumpers
Livestock: Covers all animals that can be reared commercially
Perils - sickness, injury, total loss for racehorse, loss of value (unable to breed when put to stud), loss by disease.
Contingency insurance
Concert/event cancellation/abandonment - cost of refunding tickets and rearranging event
Over redemption - cost of more redemption than expected(coupons etc)
Prize indemnity - covers cost of prize for charity event if won or drinks for hole in one
Personal accident and health insurance
Personal Accident:
- Benefits policy, benefits paid weekly/monthly for agreed period for injury or lump sum for permanent disablement
Personal accident and sickness:
- sudden onset illness eg heart failure
Kidnap and ransom
- payment of ransom
- cost of medical treatment and payment of salary
- payment for hostage negotiators
Property insurance including onshore energy
Made up at least 1/4 of Lloyd’s business in 2018 and IUA.
Property: Construction insurance
Construction insurance:
- Head contractor take out CAR insurance
- Policy period should match contract period
- Maintenance period for 12 months after completion
- Covers loss/damage to BWs, machinery movement, BI, PL and EL, damage to plant (machinery)
- EAR can be absorbed by CAR policy but often bought separate
- EAR covers loss/damage to equipment, liability if insured/equipment causes damage
Property: Property insurance
Property:
Cover depends on uses of property
- Buildings
- Machinery
- Stock
Can purchase “all risks” or just fire by itself and add on any further perils if needed.
- fire can include damage caused by putting it out
- not a chemical reaction where no ignition
Other cover: lightning, explosion, earthquake, aircraft, riots/strikes, malicious acts, storm/flood/EOW, impact damage, sprinkler leakage, subsidence
What does Expediting Expenses cover for under Property/Onshore energy?
Cover to pay for extra costs eg overtime, air freight charges for parts to repair
What will property insurers never cover??
- Inherent vice (inevitable natural behaviours such as iron rusting)
- Trade risks eg failure of creditor to pay their bills
- Normal settlement of new buildings
- War risks
- Radioactive contamination
- Anything insured elsewhere
- Any property insured for marine perils
What risks would property insurers provide as ‘buy-backs’?
- Fraud and employee dishonesty
- Theft
- Subsidence
- Jewellery
- Goods in transit
- Fixed glass
- Sanitary ware
- Money
- Land, bridges, and civil engineering works
- Crops and trees
What does property insurance use as one of the options for indemnifying the insured in event of loss or damage?
Concept of reinstatement
- Insurer agrees to make good the property lost or damaged and takes over property during period of reinstatement
What would Property insurers expect to be on more specialist policies?
- Buildings in CoC
- Livestock
- Consequential loss
- Computers
- Vehicles licensed for road use
- Own steam and other pressure plant
What would you use Day One Average Memorandum / Day One Reinstatement for?
Ensuring an adequate sums insured.
- Counteracts impact of inflation given building reinstatement may take years
Policy shows SI in two parts:
- Cost of reinstating as new everything on the policy at prices on the first day (Base/Day Kne or Declared Value)
- Agreed percentage uplift on declared value (takes into account inflation)
End result is SI which meets reinstatement costs incurred in total.
What is an onshore energy risk?
A property risk where subject matter insured is specific to energy industry.
UW considerations
- Location (proximity to cities)
- Activity (petrochemical? Power station? Oil refinery? Biofuel?)
- Risk created by nature of activity (potentially explosive?)
What does Glass Insurance cover?
- Fixed glass
- All risks cover for boarding up, replacing alarms, lettering, window frames
Can be bought as stand-alone
What does Stock Insurance cover?
- Raw materials
- Materials being used in production
- Finished stock in storage
- Physical damage cover
Agreed SI based on max exposure
Pay deposit of premium at start of insurance and make regular declarations to insurer
Claims for fire, theft or damage
What perils does Theft Insurance exclude?
Fire, money, war
Specifically:
Collusion - inside job
Entry gained by tricks or keys - employees being careless
What is Pecuniary insurance for?
Loss suffered is monetary or financial
Money insurance - what does it cover?
All risks of loss to money which is responsibility of insured.
Includes cheques, stamps, vouchers, lottery tickets. Risk is measured by negotiability.
General exclusions: war
Specific: loss from unattended vehicle, loss from use of keys, dishonesty of employees
What does Fidelity Guarantee insurance cover?
Loss of property as direct result of fraudulent act
- blanket cover for all employees
- named employees only
- named roles only
Insurers look at insurers risk management
- checking references for employees
- correct signing procedure for cheques/money
- checking of cash held on premises
- daily banking
- reconciling bank accounts
- procedures for stocktaking
- full yearly audit
Business Interruption - what is the purpose
To replace income which would have been received had loss to property not occurred and business not been interrupted.
Correct SI needs to be established so payout reflects loss.
Waiting period (the deductible/excess) is expressed in days.
Claiming on Business Interruption
- Insurers use accountants to investigate loss suffered, intention of not automatically paying out max
- Standard BI requires some physical loss damage to property and require there to have been a recoverable claim on the property
Claims:
Supplier of raw materials suffers loss and cannot supply
Power cut off from loss at power station
Homeowners insurance
Property risks written via delegated underwriting such as binding authorities or service companies.
D and O Liability insurance
Protects directors and officers for claims made by shareholders/investors where their behaviour has caused financial loss.
- categorised as US or non-US
- covers financial loss
- can include employment claims as extension
- written on claims made basis
Exclusions:
Fraud, insured persons making financial gain, anything being investigated or notified already before inception, pollution/war/radiation, bodily injury/emotional distress
Errors and Omissions (EandO)
Interchangeable term with PI and Professional Negligence
Covers professionals against claims for breach of duty of care, negligence, errors and omissions
PI compulsory for lawyers and accountants and is a claims made policy - make a claim when a claim is made against them
In legal systems, What is a concept of limitation?
After a certain period of time your right to recover in law disappears.
In English law: 6 years from alleged breach
Tort claims: 6 years reduced to 3 for personal injury
Public Liability cover
- Accidental injury to 3rd party
- Accidental loss or damage to property
- Nuisance, trespass to land/goods, interference with 3rd party’s right to air, light or water
When claims made the issue is if the insured is actually liable and to what extent - does another party share blame?
Product liability cover
Indemnity for injury or damage but only against liability in connection to a product.
Issue is who is to blame? Many parties contribute to putting a product together.
Employers liability cover
Written in wider UK composite market, not usually LM.
- legal liability of the insured for injury to employees
- legal cost of defending claims
ELTO - used to trace insurance in the past
General Liability cover
Combined/comprehensive liability insurance bought by many as it combines different classes of liability and adds in others like advertising.
Active Shooter insurance
New type of liability developed to respond to litigation faced by an insured resulting from harm involving guns/other weapons.
Add cover includes cost of crisis management, post event counselling
Financial Guarantee Insurance
Any contract of insurance where insurer agrees on occurrence of event that it will pay out. Eg: Financial failure of companies Change in interest rate Change in rates of exchange Change in property value
All event could lead to financial gain so FG is perceived to be on edge of gambling
Can be written in Lloyd’s if permission sought in normal way via business planning
Less than 2% of capacity - more likely to be given permission
Extortion insurances
People threaten companies to try to gain money eg. Alleging their products have been tampered with.
Malicious product tamper insurance assists with cost of: Removing unsafe goods Maintaining brand image Alternative goods Maintaining client confidence
Insurance for accidental contamination triggered by illness
Product Recall
A product is dangerous and needs to be recalled otherwise could risk large liability claim
Recall insurance pays for:
- Advertising recall
- extra staff
- additional space hired
- shipping in affected products
- disposing of products
- redistribution costs
War insurance
Lloyd’s syndicates can’t write war or related perils risks without Lloyd’s permission.
Have to provide realistic disaster scenario returns, and since 2012, returns related to moveable risks.
Terrorism and political violence insurance
PV covers: Terrorism Sabotage Riots, strikes, and civil commotions Malicious damage Insurrection, revolution or rebellion Mutiny or coup d’etat War or civil war
Cyber insurance
Standalone products covering loss of information from IT systems and networks or damage to them, and costs of immediate aftermath
1st party: Covers your own assets
3rd party: Covers risks of security breaches which leads to loss of others data
Mergers and Aquisitions
Company buys another company- risks faced by both sides
During negotiations for merger or acquisition parties give each other mutual warranties and indemnities. If negotiations break down warranty and indemnity insurance will protect them.
Policies will be crafted to match actual terms of merger and acquisition transaction
