Insurers Exclude SARS Virus From Coverage

THERESA AGOVINO
AP Business Writer

NEW YORK – Insurers have begun excluding SARS virus coverage from policies written for sponsors of special events such as concerts, trade shows and conventions because they know too little about the disease and its risks.

The exclusion affects event-cancellation policies written to protect sponsors against occurrences beyond their control, such as fire or hurricanes, that could ruin one-time occasions. In the past few weeks, insurers decided that they would no longer cover events canceled or hurt because of severe acute respiratory syndrome, which has killed about 170 people and sickened about 3,000 worldwide.

“The fear factor about SARS is pretty significant,” said Scott T. Brady, director of Contingency Products Group at the insurance broker, Aon Risk Services Inc. “Insurers don’t really understand it (SARS) and they can’t qualify the risk and they don’t want to take on any risk until they can figure out more about the disease.”

For example, Chubb Corp. had stopped underwriting event-cancellation policies when the war in Iraq began but resumed offering them this week, albeit with a SARS exemption.

Brokers say the situation is similar to what happened in the market after the Sept. 11 attacks when insurers began adding terrorism exemptions to such coverage.

“SARS has become the new terrorism,” said LeConte Moore, managing director of the entertainment and media practice in the New York office of Marsh Inc., a unit of the brokerage firm Marsh & McLennan Companies.

Terrorism exemptions stopped in the United States, at least, after a law was passed requiring insurers to offer terrorism insurance. Whether the trend in special events policies prompts legislation remains to be seen.

Special events coverage is a tiny sliver of the $160 billion commercial insurance market, according to the Insurance Information Institute. And most special events policies are written months in advance so near-term events canceled or hurt because of SARS would be covered. Neither Brady nor Moore said they’d seen any fallout such as canceling an event because of SARS exemptions yet.

In the United States, some insurers will agree to eliminate the exclusion.

However, such an elimination is more likely if the event will be attended by people who don’t travel outside the United States much and doesn’t draw an international audience. The vast majority of SARS cases have been in Asia.

“Insurers would rather be safe than sorry,” Moore said