Wideareadamage
Damian Glynn BA (Hons) FCA FCILA FUEDII ELAE
Head of Financial Risks
14January2016
Agenda
  CoreBIcover–recap
  RecentWeatherEvents
  WideAreaDamage-overview
  OrientExpressHotels(RCJ2012)
  WAD–Problems
  WideAreaUndamage
  PotenMalpolicyresponses
  Extensions
  Discussion
CoreBICover
  ‘if…[aRerpayingthepremium]anybuildingorotherpropertyusedby
theInsuredatthePremisesforthepurposeofthebusinessis
accidentallylost,destroyed,ordamaged…..[inthepolicyperiod],
InsurerswillpaytheBI],providedthat:
  AttheMmeofthehappeningoftheloss,destrucMonordamagethere
shallbeinforceaninsurancecoveringtheinterestoftheinsuredinthe
propertyatthePremises…[againstthelossandthatthematerialdamage
Insurerspay,butfortheoperaMonofanexcess
CoreBICover
  WhatdoesPremisesmean?
  Howusefulisthematerialdamageproviso?
RecentWeatherEvents
  StormDesmond4December2015
  Cumbria(Carlisle,Cockermouth,Keswick,Kendal,LakeDistricttowns)
  Lancashire(Lancaster)
  BoxingDayAtlanMcLow26December2015
  Yorkshire(Halifax,Leeds,York)
  Lancashire(Manchester,Rochdale,Bury)
  StormFrank30December2015
  WesternScotlandtoWales,incCumbria
CumbriaStorms
  StormDesmondwaslowpressuresystem(939mbatitslowest)which
formedon4thDecember2015anddissipatedonthe8thDecember. Cumbriafloods–orStorms?
  InaddiMontotherecordrainfallthestormalsoproducedveryhigh
windsasshowninthetablebelow.
SiteName
CapelCurig
Area
Gwynedd
MaxGustSpeed
81
NeedlesOldBattery
IsleofWight
78
HighBradfield
SouthYorkshire
77
RedesdaleCamp
Northumberland
73
Loftus
Cleveland
70
Aberdaron
Gwynedd
69
Charterhall
Berwickshire
68
Valley
Gwynedd
67
WideAreaDamage
WideAreaDamage–thekeypoint
  PremisesareDamaged–butsoisthelocalvicinity
  Neighbouringproperty
  Transportroutes,roadandrail
  UMlityproviders
  Customers
  Suppliers
  BIOperaMveclause:WhatwouldthelossbebutfortheDamageatthe
Premises
Notwhatwouldthelossbebutforthefloodinggenerally
  AssumethePremisesarenotfloodedbuteverywhereelsesMllis
  TheOtherCircumstancesclause(thisisnotopMonal)
OrientExpresssHotels–RCJ2012
  2005HurricaneKatrinahitNewOrleans
  WindsorCourtHotel(OrientExpressHotelsGroup)wasDamaged
  WholeofNewOrleansDamaged
  NonDamageissues:curfew27August,mandatoryevacuaMon6
September(cityre-openedOctober)
  IniMalInsurerresponse
  BIoperaMveclause–coverforBI‘resulMngdirectlyfromlossdestrucMonordamage…’
  Damagedefinedas‘directphysicallossdestrucMonordamage.’
  Trends(othercircumstances)clause
  DenialofAccesscover(lowlimit)
  Actofcompetentauthority(lowlimit)
OrientExpresssHotels–RCJ2012
  OEHPosiMon
  ConcurrencyofwideareaDamageshouldnotexMnguishBIcover
  ShouldbeenMtledtoBIlossovertheperiodofrepairatthePremises
  ‘Butfor’testshouldnothavebeenapplied,shouldhavebeenviewedstwoconcurrent
causes,oneofwhichwasInsuredandoneofwhichwasuninsured
  ArMficialityofassumingan‘undamagedhotelinanotherwisedamagedcity’
  OrientExpressHotels(RCJ2012–ArbitraMonAct1996)
  InsurerposiMonupheld
  ArMficialityargumentdoesnotoverrideclearpolicylanguage
  OthercircumstancesclauseisconcernedwithDamage,notthecausesofDamage
WideAreaDamage-problems
  Theretailhighstreet
  Shoppingcentres
  ApplyingtheOtherCircumstancesclause–DIY,furniture,electronic
goods(salesdirecttothepublic)
  Factorsdrivingloss
TheretailHighStreet
  Butcher,baker,candlesMckmaker
  Eachshop’sBIlossdrivenbythegeneralunavailabilityofthehighstreet
RetailHighStreet–Issues
  Issue1:EvenifapolicyholdersuffersDamage,andhasBIcover,the
policymaynotrespondduetodamageawayfromthePremises
  Issue2:Thegreatertheextentofphysicaldamage,thelessinsurerspay
asBI(consideredonaPremisesbyPremisesbasis)
Shoppingcentres
  WhatdoesPremisesmean?
  Theshoppingcentresite,includingcarparks?
  Theshoppingcentrebuilding?
  Thespecificretailunitoccupied?
  Issue3:Theearlywormgetseatenfirst–whyacceleraterepairs?
ApplyingtheOtherCircumstancesclause
WA
WAD
Damage at the
Premises
Retailer re-opens
Customers homes are dry
End of MIP
FactorsdrivinglossandBIextensions
Core Cover
Damage at
the Premises
Damage in
the vicinity
Damage beyond
vicinity
Y
Denial of access
Y
Loss of attraction
Y
Act of competent authority
Y
Suppliers Extension
Y
Y
Customers Extension
Y
Y
Notifiable Disease
Utility failure:terminal ends
No Damage
Y
Y
Y
Stackingextensions
  Allavailableextensionscombinedwiththecorecoverwouldmeanthat
WADisunlikelytobeanissue(butthebuildingsiteissuesMllremains)?
  MostextensionsapplytothePremisesanddonotcompositelyexpand
DenialofAccess
  IsafloodedroadaDamagedroad?
  Underlyingsurfacemaynotneedrepair
  Butpassableonlytoboats
  TemporaryImpairmentofuse
  Butbeware‘smalld’inextensions(Damage/damage)
Agenda
  CoreBIcover–recap
  RecentWeatherEvents
  WideAreaDamage-overview
  OrientExpressHotels(RCJ2012)
  Problems
  PotenMalpolicyresponses
  WideAreaUndamage
  Terroristalacks
  CryptoSporidium
  Discussion
PotenNalSoluNons
  WhatistheintenMonofInsurers?
  WhatistheexpectaMonofInsured?
  CILA/CII/IILBIreport–2.2WideAreaDamage
  USwordingsandwindfallprofits/losses
  PotenMallyaddclausetotheeffectthatWADwillnotreduceBIbelow
levelflowingdirectlyfromtheDamageatthePremises;
  RestrictBItoperiodofphysicalrepairs(nobuildup)
  ReviewDamageatthePremisesasthetriggerforBIcover
  IncludemorespecificWADexclusions
Wrapup/AnyquesNons?