CBI prices up even though Japan losses still to filter through
According to Nicholas Murrell, Head of Property at JLT Specialty Ltd, the confidential nature of contingent business interruption (CBI) insurance means it is difficult to get a handle on losses. Post earthquake revisions to building codes are holding back some reconstruction work, and the insurance market is seeing few CBI claims filter through. However, more CBI losses from Japan are likely in the second half of 2011, he said. “We know the losses are sitting there,” he added.
There has been an ‘influx’ of CBI insurance into London, with Lloyd’s having been approached by a number of companies in Japan looking for cover. Prices for CBI insurance have increased and catastrophe model revisions have extended the earthquake zone. “The insurance market is still open but we don’t see firm orders for CBI cover,” said Mr Murrell.
The consensus is that pricing is up 10% in Japan, but insurers are asking for increases of 20%–30%, he said. Also buyers need appropriate attachment points and limits, he added.
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A recent survey by JLT showed that most buyers would be interested in buying more CBI cover, said Peter Hacker, Head of the Communications & Technology Practice at JLT Specialty Ltd. The survey also found that 86% felt insurers were not meeting their CBI insurance needs.
“Companies would buy more, there is significant demand for CBI but insurers will never meet this demand. A material limit for a Fortune 1000 company would be $200m at least, but that sort of capacity will not be available in the future,” said Mr Hacker.
An insurer attending the event said that it was selectively offering CBI to its clients. But it needed more information on supply chains before offering higher limits.
