Hi Bryan :)
Regarding your original question, "Can I insure my insurer?" and
having spoken to my various professional contacts (bearing your
provided examples in mind), I can comment as follows;
1. if a claim on your car insurance was in excess of the stated policy
limit, you would simply have to bear that excess (or not, as the case
may be!) and;
2. if the insurers who underwrote your house insurance went bust, you
would simply have to find another insurer and take out a new policy.
Additionally, you could assume that you would not get back any
premiums that you paid to your previous insurer before they went bust!
At present, there are no "payment protection plans" regarding lost
insurance premiums and the best that you could hope for is that a
suitably qualified broker would be able to negotiate a new policy for
you on similar or better terms that your previous policy, taking into
account any history of "no claims", etc. re: your previous policy as
held by the defunct insurers.
There are, however, two *potential* options which you could
investigate as a means of "insuring your insurer" BUT they are likely
to be disproportionately expensive in relation to the benefit derived.
Option 1
You could ask Lloyds of London (or more likely, one of their
syndicates) to underwrite your specific risk for you. For example,
you could specify that you want a contract stipulating that they will
underwrite any losses over and above the £20 million policy limit that
you have on your car insurance. Similarly, you could ask them to
underwrite any risk pertaining to the event of your insurer's
bankruptcy.
Lloyds are famous for having underwritten all kinds of obscure and
wonderful contracts (think celebrity cases such as famous conductors
insuring their hands or famous actresses insuring their legs and
you're halfway there)! Have a look at this article:
http://www.bizjournals.com/pacific/stories/1999/06/14/focus2.html?jst=s_rs_hl
and you'll see further examples of the more unusual kinds of insurance
policies (called "surplus lines") that are underwritten.
As you can imagine, bespoke policies do not come cheaply and you need
an authorised broker who will handle your business via Lloyds on your
behalf - see:
http://www.lloyds.com/index.asp?ItemId=1905
Of course, Lloyd's aren't the only company in the UK underwrite
surplus lines but they are certainly one of the most well-known! A
quick search on the internet revealed at least 3 UK insurance brokers
who indicated on their websites that they would be willing to discuss
more unusual or bespoke policy requirements.
Option 2
This is a rather more arcane option and would require you to execute a
fairly complex financial instrument called a credit derivative. Two
very good, basic definitions of what a credit derivative is can be
found at:
http://encarta.msn.com/encnet/features/dictionary/DictionaryResults.aspx?refid=561546766
and
http://www.investorwords.com/cgi-bin/getword.cgi?1200
What follows is an extremely basic and purely hypothetical example of
this concept:
Using the example of insuring excess risk, you would go to an
investment bank that employs lots of clever people and ask them to
create an asset which utilises your insurance policy with your insurer
as a reference asset (or some similar permutation thereof). You get
newly created asset ("CA"), investment bank gets periodic payments
from you (and you should assume that these periodic payments would be
very large indeed). If you subsequently had to deal with a claim in
excess of your £20 million limit, you would return the CA to the bank
and they would pay you the "value" of the CA which would hopefully
cover your excess.
I hope that you find this information useful and interesting - more
importantly, I hope you never have to act upon it! ;)
Kind regards
jem-ga :)
p.s. Ran in the Flora 5K (Hyde Park) today - you see, I stay on my
toes in more ways then one!
Search strategy:
1. Lloyds +of London:
://www.google.com/search?hl=en&lr=&ie=UTF-8&oe=utf-8&q=Lloyds+%2Bof+London&btnG=Google+Search
2. what is a credit derivative?:
://www.google.com/search?hl=en&ie=utf-8&oe=utf-8&q=what+is+a+credit+derivative?
3. unusual insurance; unusual insurance UK
://www.google.com/search?hl=en&ie=utf-8&oe=utf-8&q=unusual+insurance
4. Conversation with professional contact who is a
reinsurance/insurance intermediary in the UK
5. Conversation with professional contact who is a finance expert in
the derivatives market (both UK and overseas) |
