Lower sublimits may be added to coverages after Japanese quake, tsunami

The Japanese earthquake, tsunami and resultant radiation contamination will likely result in much lower sublimits being added to coverages, particularly contingent time element coverages, said Duncan Ellis, managing director at Marsh USA.A sublimit is a limitation on the amount of coverage available for a specific type of loss. Ellis spoke on a panel of experts discussing the insurance implications of the March 11 trifecta of Japanese disasters at the Risk and Insurance Management Society (RIMS) annual conference in Vancouver.While “ample capacity” exists in the commercial market, Ellis cautioned that a string of recent events in early 2011 – Australian floods and typhoons, an earthquake in New Zealand, the Japanese disasters, tornadoes in southwest USA and an impending hurricane season – have given underwriters pause as to how they are writing and pricing coverages.”I think the biggest issue we’re seeing coming out of this is the sublimits which are being provided around contingent time element,” Ellis said. “No longer are there $100-million or $50-million sublimits being thrown around [in the market],” Ellis said. “I think underwriters will pull back on some of these coverages.”Other coverages, such as miscellaneous unnamed or unscheduled locations – usually in the form of an endorsement that gives blanket coverage for various locations which the insurance companies “don’t have a chance to underwrite” – will likely also see tighter limits, he said.