With the year 2000 bearing down upon us like the meteor in Deep Impact, it is not surprising that companies, be they users, vendors or fixers, might look for insurance to cover them for any losses incurred when it hits. The insurers, however, are understandably reluctant to accept much of that risk. The Association of […]
With the year 2000 bearing down upon us like the meteor in Deep Impact, it is not surprising that companies, be they users, vendors or fixers, might look for insurance to cover them for any losses incurred when it hits. The insurers, however, are understandably reluctant to accept much of that risk. The Association of British Insurers, for instance, has issued guidelines in which it basically advocates blanket exclusion of Y2K losses, working on the premise that insurance is for covering the unexpected, which is scarcely a category into which the year 2000 can be said to fall. There are, however, companies who are offering some degree of coverage. American International Group, Inc (AIG), for instance, launched what it calls its Millennium Insurance policy in March last year, covering business interruption and legal liability when the insured’s own computers, or those of a third party, fail due to a Y2K problem, causing his or her business to incur losses. It also covers errors and omissions (E&O) and directors and officers (D&O) insurance and legal liability from the insured’s own or a third party’s conversion efforts. If that all sounds great, it should be pointed out that the limit of the liability is US$100m, while the premium can be anywhere between $65m-$85m. And if that sounds a bit steep, AIG points out that, if the losses are ‘favorable’, the insured will share in the benefit. Apart from costing a fortune, the other problem with the Millennium policy is that you won’t be able to buy it after August. In April this year, the company came up with another, more limited product, specifically for directors, officers and corporate liability, called D&O Gold, which actually includes a feature called the Year 2000 CrisisFund, providing $10,000 to pay the fees of a public relations firm to manage the insured’s disclosure communications relating to the Y2K issue. Notably absent from the market, however, is professional liability or professional indemnity insurance for companies carrying out the remediation work. Insurers and brokers in London and New York say it is all but non-existent, and by and large, the answer would seem to be for systems integrators and consultants doing Y2K renovations to write into their contract that, if things do go awry, their liabilities are severely restricted, or nil. And if the clients don’t like it, they still have another year-and-a-half to find someone else to do the job.