Bermudian Media Warns Insurance Sector Of Luxembourg Rival

by Ulrika Lomas, Tax-News.com, Brussels

12 April 2002

Following the announcement last week that six leading European insurers and reinsurers have agreed to form a new insurance venture, based in Luxembourg, to provide cover against terrorism, the Bermudian media has warned that some of the jurisdiction's newly reincorporated US insurers may be facing some tough competition.

In an article published earlier this week, and entitled 'Luxembourg Ups The Reinsurance Ante', the Royal Gazette revealed that the decision follows similar moves by several Bermuda based start-ups aiming to capitalise on a growing demand for cover against terrorism.

Following the September 11 attacks, which resulted in the tragic destruction of the World Trade Center and losses of billions of dollars for insurers, the industry has shied away from possible exposure to such claims, a move which has driven up premiums.

The new European initiative, Special Risk and Reinsurance Luxembourg, which is supported by Zurich Financial Services, Allianz, Hannover Re, Swiss Re, XL Capital, and Scor, will offer limited coverage for physical loss or damage to property, although business interruption losses will not be covered.

According to a Financial Times report on the new venture last week, there has been criticism from industry representatives in countries such as Germany, where the insurance sector is endeavouring to persuade the government to act as insurer of last resort in the event of terrorist attacks.

However, Allianz, which will hold an 18.2% stake in the venture, has dismissed fears that the move will undermine calls for state backing, arguing that Special Risk and Reinsurance Luxembourg is designed to complement state efforts rather than replace them.

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