Six of the world’s largest insurance companies announced that they intend to establish a joint venture in Luxembourg, named Special Risk Insurance and Reinsurance Luxembourg S.A. (SRIR), to provide “limited coverage” for physical loss or damage to insured properties with a total committed capital of € 500 million ($442 million).
The investors in SRIR are the Anglo-Swiss Zurich Financial Services, Bermuda’s XL Capital Ltd, Swiss Re, and Germany’s Hannover Re and Allianz, each holding an 18.2 percent in SRIR, and France’s SCOR with a 9.1 percent stake. “The company will operate independently of its founders with separate management and underwriting teams based in Luxembourg,” said the announcement.
Allianz took the lead in announcing the initiative last February. It said at the time that Swiss Re and Zurich were committed to forming the new company, but indicated it was still looking for more partners. XL, Hannover and SCOR’s commitment man that Europeans will now have a private source of terrorist coverage to supplement that available under various government programs.
In fact SRIR’s announcement indicated that “private solutions remain complementary to state sponsored schemes established prior to and since September 11, 2001 and are not meant to replace them.” The caveat is especially important to German insurance groups, several of whom had voiced the opinion that Allianz’ initiative would undermine their efforts to obtain government sponsored terrorist coverage.
SRIR intends to confine its activities to Europe, and will adopt strict limits. “Policies offered will only cover damage to property resulting directly from an act of terrorism and will be focused on Europe. Business interruption and liability losses will not be insured. The company is committed to controlling its risk accumulation and has therefore adopted specific criteria to control and limit its exposure. Within any 600 meter radius from a covered property the coverage will be limited to EUR 275 million [$243 million],” said the announcement.
It added that, “The company will accept business through all recognized insurance distribution channels, including insurance and reinsurance brokers. In addition, it intends to offer coverage directly and through banks as well as insurance and reinsurance companies. SRIR plans to start underwriting business during the second quarter of 2002, subject to approval by the regulatory authority in Luxembourg.”
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