Erschienen in Ausgabe 9-2017Märkte & Vertrieb

287. Serial loss clause

Von Keith PurvisVersicherungswirtschaft

Lesen Sie den vollständigen Artikel

Erhalten Sie Zugang zu allen Artikeln unserer Fachzeitschriften und Publikationen.

287. Serial loss clause

The serial loss clause has a wide range of applications in several classes of insurance for corporate customers. The basic idea in all cases is to protect the insurer from a number of claims that have a common cause by dealing with them as if they were only one claim. The cause might be a design error or a recurring mistake in production, which constitutes a potentially unquantifiable risk. Two examples follow, which show how the serial loss clause operates in product liability and engineering insurance respectively.
In Germany product liability policies are almost always written on an occurrence basis, the insurer paying for claims that occur during the policy year. Imagine that such a policy provides Euro 10m coverage each and every loss and Euro 20m in the aggregate. In the course of the year there is a claim for Euro 3m. The insurer recognizes that this was caused by an error in the production process that could well recur. The policyholder will be informed that the total claims payment for all subsequent claims due to this manufacturing error will be regarded as a single claim and thus be limited to Euro 10m. If, for example, there are two further claims of the same type for Euro 5m and Euro 4m, making a total for all three claims of Euro 12m, the insurer will only pay Euro 10m. Although the serial loss clause has a limiting effect, there are two important advantages for the policyholder. Firstly, any deductible is usually only applied once for all serial claims, and secondly, serial loss claims reported after the policy year has ended are also paid. This is because they are regarded as being a manifestation one claim that occurred during the policy term: that is, a temporally extended loss occurrence (ein zeitlich gedehntes Schadenereignis).
The serial loss clause is also important for engineering insurers, especially for risks that include new technologies, and in the literature wind turbines are frequently mentioned in this respect. For example, when a blade breaks or a motor catches fire and these events are due to a design or manufacturing error, it is probably only a question of time before other turbines in the wind farm will also capitulate. The serial loss clause is invoked. The first one or two claims are paid in full, but subsequent claims will only be partially settled in accordance with a falling scale that quite rapidly reaches zero. Engineering insurers and their reinsurers that waive the serial loss clause only…