Lloyd’s chairman touts need for contract certainty

The insurance coverage trial which followed the felling of the World Trade Center towers in the September 11, 2001 terrorist attacks highlights the need for greater contract certainty, says Lloyd’s chair Lord Peter Levene.
Levene, speaking to a group of insurers, brokers and others in Norway, says the case, which centers on whether the destruction of the buildings should be classified as one event or two (thus doubling the claims payout), was complicated by the absence of final policy wordings in place prior to 9/11.
“To any outsider, it must seem highly unusual that this single agreement should not be in place,” Levene comments. “Why is it that participants so often fail to agree final policy wordings for commercial insurance contracts prior to inception or even, as here, prior to the loss?”
Levene says the lack of contract certainty not only hurts the client and the insurer, but also leads to the kind of high-profile cases such as that advanced by WTC leaseholder Larry Silverstein, which hurts the image of the entire industry.
“In my view, as a newcomer to insurance, I found the reluctance to change traditional practices totally unacceptable,” Levene says.
Now that contract certainty is being pushed to the forefront, he adds, Lloyd’s is making changes to respond. This includes the new standard slip form introduced last year, as well as investment in Lloyd’s electronic trading platform, Kinnect.
Levene also highlighted the need for greater transparency prompted by the investigations of New York Attorney General Eliot Spitzer and the need to review how the industry models catastrophic risks following 2004’s devastating natural disasters in his speech.