Insurance companies issue exclusion endorsements for Y2K
By Tom Tropp, Jr.
Operations Manager
Tropp & Company, Inc.
In what has become the major news story of the approaching millennium, a major, worldwide exposure has been realized. With the current global reliance on computer systems, there is a chance that various critical systems will fail to properly roll over to the year 2000.
Tropp & Company’s research on this subject has taught us that this is not a new problem. In the 1970s, when the first personal computers began coming on line, their designers recognized the flaw in their operating systems. However, the cost (in terms of computer memory) of including those extra two digits would, at that time, have been prohibitive. The advancements in technology since that date have made memory much cheaper and more powerful. Including four-digit dates in modern systems no longer puts a drain on system resources. However, there are still a number of older systems out there, which may not have the adequate resources or programming to recognize dates after 1999.
Despite the dismal picture being painted by many people, our technical advisers assure us that this problem has been blown way out of proportion. The chances of major disasters resulting from the “Y2K bug” are very slim.
Be that as it may, insurance companies have recognized this potential, and have issued endorsements on most types of policies, excluding loss arising from Y2K non-compliance. Industry experts have determined that, however unlikely a major Y2K incident may be, such an incident could potentially cause such widespread and major loss that it would put the insurance companies out of business. This is referred to as an uninsurable risk. Much like losses resulting from flood or earthquake, the potential damages from a nationwide power outage or similar type of disaster. Unlikely though this type of tragedy may be, insurance companies have recognized the potential and chosen to issue endorsements pointing out that their policies never intended to cover this type of loss, and such a loss would therefore be excluded. For more information on Y2K exposures and Y2K exclusion endorsements, please feel free to call your Tropp & Company account representative.
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