EXCESS,
SURPLUS LINES AND REINSURANCE
(ESLR)
Nothing But Net
By: Larry
P. Schiffer
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Are you ready for the year 2000? I'm not talking about whether you are ready for the next
millennium and the big party you plan to attend on New Year's Eve, but whether you are
ready for what has been called the Millennium Bug, Y2K, the Year 2000 problem. If you
don't know what I mean, then it may be too late for you.
The Year 2000 problem concerns difficulties that may or may not occur with many computer
programs and computer chips or devices that use a two-digit date code, rather then a
four-digit date code to process information. For example, if your client's accounting
program uses a two-digit date code, it may not recognize the year 2000, but may think the
date is now 1900. While the problem is most pronounced in older programs (called legacy
programs), many new computers, electronic devices that use computer chips imbedded with
code, and relatively new programs may have problems recognizing the year 2000. Some
commentators believe that on January 1, 2000, many important computers will fail, causing
a variety of disruptions ranging from financial to physical.
Why mention this in a newsletter concerning excess, surplus lines, and reinsurance? If the
Year 2000 problem does manifest itself as predicted by some, property and liability claims
will be made against all varieties of insurance policies, including excess and surplus
lines policies. Reinsurers, of course, will be faced with ceded claims based on Year 2000
losses and will have to assess whether those claims are properly ceded under their
reinsurance contracts. Some of you are working with clients on Year 2000 compliance
programs and dealing with Insurance Department inquiries about company Year 2000 plans. If
the claims come in -- and some have started -- many of you will be litigating these
issues. Being sophisticated readers, many of you are familiar with these issues and are
preparing yourselves, your clients, your firms, and your companies for the events that may
occur on that fateful day. Those who aren't, had better get up to speed.
The Internet, of course, is a great source of information on the Year 2000 problem. Nearly
every major computer site has a Year 2000 sub-page. There are also pages specially devoted
to this issue. These Year 2000 pages collect information about the problem, provide fixes
to software, host discussions, and provide a great deal of information about the issues
surrounding the Year 2000 problem. Some examples are: the Y2K Home Page at http://www.y2k.com and the ABA's Year 2000 resource page at http://www.abanet.org/tech/ltrc/2000/home.html. Even
some insurance regulators have gotten into the act. For example, the New York Insurance
Department has a Year 2000 page with its relevant Circular Letters and links to other Year
2000 resources. You can find it at http://www.ins.state.ny.us/year2000.htm#
TOP_OF_YEAR2000. There is no better source for Year 2000 issues then the various Year
2000 pages on the Internet. Log on and prepare yourself for the new millennium. Please
e-mail me at lschiffe@llgm.com if you have any
questions or would like to see a column on a particular on-line topic.
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