The company, named Special Risk Insurance and Reinsurance Luxembourg S.A., will be focused on European clients and will cover only property damage. Business interruption and liability losses will not be insured, said a company announcement.

SRIR, which has committed capital of 500 million euros ($440.4 million, at current exchange rates), plans to start underwriting business during the second quarter of 2002, subject to regulatory approval in Luxembourg.

Zurich Financial Services, XL Capital, Swiss Re, Hannover Re, and Allianz each hold stakes of 18.2 percent in the new company, while SCOR holds 9.1 percent.

A joint announcement from the shareholders said SRIR will function independently of its founders, with separate management and underwriters operating from Luxembourg.

“The company is committed to controlling its risk accumulation, and has therefore adopted specific criteria to control and limit its exposure,” said the announcement. Indeed, the companies said that within any 600-meter radius from a covered property, the total coverage offered for the area will be limited to 275 million euros ($242.2 million).

As an example, Claudia Stulten, a representative for ZFS, explained that if one building in an area is insured for 175 million euros ($154.1 million), then coverage for another building within the 600-meter radius would be limited to 100 million euros ($88.1 million).

“Sept. 11 made it very clear that the possible exposures from terrorist acts are much, much higher than ever imagined by the industry,” Ms. Stulten told National Underwriter. “As a result, SRIR has to say, This is how much we can cover, but no more than that. It could be that this wont be enough for a client, but thats as much as SRIR can offer,” she added.

“Its actually one of the reasons why SRIR is saying that it is important for state solutions to be developed, because private industry can only cover so much,” she said, noting that only France, Spain and the United Kingdom have developed state-sponsored pools for terrorism in Europe.

“The establishment of SRIR signals the confidence of the investors in the development of workable private solutions to the provision of terrorism cover,” said the joint announcement. “However, private solutions remain complementary to state-sponsored schemes established prior to and since Sept. 11, 2001, and are not meant to replace them.”

Ms. Stulten noted that SRIRs focus is on Europe, but “on a client-to-client and case-by-case basis, it could be that it will offer coverage for European customers that have subsidiaries located elsewhere.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 15, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.