今回のまとめ

今回のコラムでは、保険の「引受条件」に比べて、重要でありながらもあまり認識されていない「免責」について記した。

その理由は、「保険＝全部のリスクがリスクヘッジ（除去・回避）された」と考えている方が、キャプティブを設立するようなリスクマネジメント意識の高いお客様の中にも、まだいらっしゃるということに、最近改めて気づかされたからである。

グローバル・リンクでは、筆者また他の「保険引受」に長らく従事してきたスタッフが、「該当する保険」に関して、その保険証券、約款の隅々まで徹底して読み込んで、コンサルティングをおこないキャプティブの設立をおこなっていくが、そのお客様は、グローバル・リンク以外のキャプティブ・コンサルティング会社でキャプティブを設立され、1年経過してそのサービスと専門性に満足されなくなり、グローバル・リンクにキャプティブの運営管理の委託をされてきたお客様であった。

保険内容を具に検証していくとグローバル・リンクとしては、絶対に看過できないいくつかの「補償の穴」が発見された。「キャプティブを設立したコンサルティング会社」が保険の引受をあまり知悉していない、保険販売をメインとする会社であったためか、「免責条項の詳細」にまで目が届かず「補償の穴」が大きく開いたキャプティブが設立されていたのである。

弊社からの指摘を受け大変驚かれたお客様の意向を確認、｢リスクマネージャー」として弊社が元受保険会社と「免責条項」の変更交渉、同様にキャプティブからの再保険（再々保険）を受ける再保険会社とも変更交渉をおこなうことになったのである。

保険の更新日まで数ヶ月の期間があったため、交渉が可能であったが、キャプティブを設立するレベルまでリスクマネジメントに強い関心を持っている企業でも、「免責」を具に検証していなかったことに驚くと同時に、「キャプティブ・コンサルティング会社の専門性の重要性」に改めて気づかされたのであった。

「この数年、節税を売り物にしてハワイ州にキャプティブの設立を勧奨してきたキャプティブコンサルティング会社の多くは、損害保険会社の引受部門で保険の引受に専門的に関与した経験のないスタッフで構成されていて、保険会社頼みでキャプティブをつくってきたが、どうも本来のリスクマネジメントがなされていないキャプティブが多く、タックスヘイブン対策税制の変更に伴って、バタバタと『節税キャプティブ』をつくったところが店じまいをしているようです」と、先日保険関係のあるジャーナリストの方からお話を伺った。

「適格ではないキャプティブが多いですね」という彼の言葉に、「リスクマネジメントの役目を果たせないどころか、欠陥キャプティブが多いのではないか」と懸念しているが、一方「キャプティブは入念なリスクマネジメントの結果設立すべきものである」と、これまでグローバル・リンクが主唱してきたことへの理解が深まっていく事象の1つでもあろうと考えている次第である。

執筆・翻訳者：羽谷 信一郎

English Translation

Captive 20 – What is exclusion in insurance?

Late last month, on September 24, 2020, the U.S. District Court ruled in favor of the medical corporation group, stating that “it was not reasonable for a large property and casualty insurer, Company A, to deny coverage to a group of medical corporations in a case in which a group of medical corporations in Florida filed an insurance claim regarding business interruption due to a Covid19 pandemic, due to a viral exclusion clause in the policy.”

The ruling in Medical Corporation Group v. Major Insurance Company was the third of four “business interruption insurance cases” brought in connection with the new corona pandemic to be “ruled in favor of policyholders in a federal district court.

Company A argued that “the underwriting conditions and exclusion clause are clear and that losses caused by the virus, including the new corona, are insurable exemptions,” but the plaintiff medical corporation group argued that “the language of the exclusion clause is ambiguous, despite the representation that it is an ‘all-risk policy,'” and the court accepted the plaintiff’s argument and held that “it would be improper to make a determination of insurance coverage at this stage based on some ambiguous language in the policy terms and conditions.

The court also strictly pointed out the ambiguity in the policy and policy terms and conditions, stating that “the language in the policy and policy terms and conditions does not explicitly state the plaintiff’s loss event as an insurance exclusion,” but also that “the virus insurance exclusion clause states that the policy does not pay for loss or damage caused directly or indirectly by the presence, growth, multiplication, proliferation, spread, or any activity of ‘fungi, wet rot fungi, dry rot fungi, or viruses’.

Company A had presented several cases concerning the virus exclusion at the trial, but the court rejected the defendant Company A’s argument, pointing out that “none of those cases concerned the impact of the new corona” and further that “as there is no corresponding case law on the impact of the new corona on the virus exemption under the insurance policy, this court adopts the plaintiff’s argument for the moment”.

1. What is exclusion?

In order to understand exactly what it means, we refer to the website of the General Insurance Association of Japan (GIAJ), where the word “disclaimer”, meaning “exclusion of liability”, is commonly used in the insurance world.

Question:  What is an exclusion and deductible amount?

Answer: “Exclusion” means that the insurance company is not liable to pay the claim even if the damage occurs, and “Deductible” means the amount of money that the insured or others will have to pay themselves in the event of damage, which is set at the time of the contract.

“Exclusion” means that the insurance money will not be paid, and the specific items that are exempted from liability are referred to as exclusion of liability. In the event of damage, the insurance company is obligated to pay the claim based on the contract, but the policy stipulates that the insurance company is not obligated to pay the claim for damage caused by specific items. For example, it is common to stipulate an exclusion of liability for damage caused by the policyholder’s intentional actions or war.
Please note that even if the damage would be covered under normal circumstances, it may be exempted by a special clause in order to reduce the burden of insurance premiums.
The deductible is an amount of money set at the time of contract that the policyholder must pay for a certain portion of the damage. The purpose of the deductible is to reduce the burden of insurance premiums on the policyholder, and to reduce the administrative burden of the insurance company to investigate the damage caused by a small amount of damage, as well as to prevent moral hazard among policyholders.
When you purchase an insurance policy, it is important to make sure that you are aware of the specific items that are excluded from the exclusion (if the policy does not pay) and the amount of the deductible (co-payment). Sufficient consideration is necessary to avoid the possibility of not being able to pay claims in the unlikely event of an insurance policy being purchased.
Therefore, it is important to confirm that the content of the insurance policy is consistent with your needs, as the insurance solicitor is obliged to explain the policy in the policy summary and warning information at the time of signing the policy.

2. There are two types of exclusions.

The website of the General Insurance Association of Japan has the above explanation, but I wonder how many people actually check the contents of the policy clauses written in those small letters?

From the point of view of risk management, insurance is one of the ways to exclude or avoid risks, but there are some risks that the insurance company cannot or does not want to take on, just like the “exclusion” clause mentioned above. This clause is “a very important clause because it specifies events that may prevent the insurance from functioning”.

It is not widely known that there are two types of exclusion clauses in this “exclusion”: one is “a risk that can be compensated with the addition of a special endorsement (clause) with the insurer’s consent and with the payment of an additional premium” (relative exclusion), and the other is “a risk that there is no special clause to compensate for the risk and that is contrary to public order and morals. It is “a risk that the insurance company cannot underwrite under any circumstances, including the risk that the insurance company is not able to meet the requirements of the policy” (absolute exclusion).

This is the reason why “the exclusion” column was largely divided into two sections until recently, when the structure of the “insurance policy clause”, which insurance companies send to policyholders as evidence of the conclusion of insurance contracts along with the insurance policy, was drastically changed due to “improvements in the clarity of insurance policy clauses”.

The first and most important step in risk management is to verify the insurance policy and policy conditions (contract) to see if there are any “holes in coverage”. It is necessary to pay close attention to the fact that “insuring” does not mean “risk hedging (exclusion or avoidance)” by “exclusion conditions”.

3.Documents related to the non-life insurance contract

What are the documents that determine the terms and conditions of an “insurance contract”, i.e., the documents that show the details of entering into a non-life insurance contract? In general, the following documents are used in a non-life insurance contract.

(1) Statement of Important Matters (summary of the contract and warning information), (2) Clauses (details of insurance conditions), (3) Insurance policy (details of the insured subject), (4) Premium receipt (except in the case of direct debit), and depending on the type of insurance, some insurance companies provide a “policy pamphlet” describing the terms and conditions of the policy in an easy-to-understand manner at the time of signing.

The following explanations are available on the website of the General Insurance Association of Japan for a closer look at the documents proving non-life insurance contracts.

Explanation of important matters (policy outline and warning information)

At the time of signing a contract for non-life insurance, you will be given a “Summary of Contract” and “Alert Information” that describes important information about the insurance policy.
In the “Summary of Contract”, the structure of the product, contents of coverage, main clauses that can be attached (or set), insurance period, insurance amount, items related to premiums, items related to payment of premiums, items related to dividends, existence of surrender value, etc. are described.
The “Alert Information” section includes information on cooling off, notice requirements, etc., the start of the policy period, the main items in the event of non-payment of claims, the grace period for premiums, policy lapse and reinstatement, cancellation (surrender) and availability of surrender value, safety net, and other matters requiring special attention.

Policy Conditions

1. property and casualty insurance is a product that compensates for economic losses that may occur in the future. It is difficult to define the contents of the contract for each policyholder in a non-life insurance contract that is based on the assumption that many people will contract with the insurance company. Therefore, insurance companies define the contents of the contract in advance as “General Conditions”. Although the contract is made by the insurance company, it is considered to be binding on the policyholder.
2. General Conditions stipulate the responsibilities of the insurance company (coverage) and the obligations of the policyholder and the insured, and are usually composed of general insurance terms and conditions and special provisions.
Ordinary insurance clauses are the standard contents of the contract and set forth the cases of payment or non-payment of insurance benefits, insurance coverage, insurance payment amount, duty to notify, duty to notify, and duty to notify when damage occurs.
Special clauses modify or alter the standard policy terms and conditions to change the scope of coverage according to the actual situation or needs of the insured objects or people at risk. These special clauses take precedence over the ordinary insurance conditions.

Insurance policy

1. The insurance policy describes the object of insurance, the amount of insurance and the premiums, etc., and is regarded as evidence of the formation of the contract and its contents.
2. Under the Insurance Law, the insurance company is required to deliver the insurance policy without delay after the conclusion of the contract. (A certificate of liability insurance is issued for CALI (compulsory automobile liability insurance). If the policy is automatically renewed, no new policy will be issued and a certificate of insurance policy renewal will be sent.
3. Even if the policy is lost or destroyed, the policyholder’s name, address, and date of birth are requested to inform the insurance company of the name, address, and date of birth of the policyholder, and the policyholder can receive payment of the insurance benefit by following the procedures specified by the insurance company.

4. When is a non-life insurance contract concluded?

A contract of non-life insurance shall be deemed to be a contract for a consideration other than a sale and purchase (1) Article 555 (Sale and purchase) of the Civil Code: “A sale and purchase shall take effect when one party promises to transfer a certain property right to the other party and the other party promises to pay the price for it” and (2) “Article 559 (Application mutatis mutandis to contracts for value). The provisions of this Article shall apply mutatis mutandis to the following provisions. It is said to be an “acceptance contract” (a contract that is formed only by an oral understanding of the contract) based on “the nature of the paid contract does not permit this, however.

Therefore, a contract is considered to be concluded when the important parts of the insurance coverage, insurance amount, and coverage (the elements of the contract) are determined, and “a contract is concluded if the policyholder expresses an intention to apply, including verbally, and the insurance company expresses an intention to accept the contract”. It is important to note that an insurance contract is valid even “because you said it orally”.

Summary of this issue

In this column, I wrote about the important but less-recognized “exclusion” compared to the “underwriting conditions” of insurance.

The reason for this is that it has recently come to my attention that there was still a risk management-conscious client, such as those who established captive, who thought that insurance = all risks have been hedged (removed or avoided).

At Global Link, this author and other staff with a long history of underwriting experience thoroughly read the policies and conditions of the relevant insurance policies and establish a captive. The client had established the captive with a captive consulting firm other than ours, but after a year they were no longer satisfied with the service and expertise and asked us to manage the captive for them.

Upon commissioning and reviewing the policy, Global Link discovered a number of “coverage holes” that could not be ignored. Perhaps because the “consulting firm that established the captive” was a company that mainly sold insurance and did not know much about insurance underwriting, it did not pay attention to the details of the indemnity clause and established a captive with holes in the coverage.

The client was very surprised to learn that we were not simply transferring the policy to the captive, but rather acting as a “risk manager” to negotiate the changes to the indemnity clause with the primary insurer as well as with the reinsurance company that would receive the reinsurance from the captive (retrocession).

With a few months to go before the policy renewal date, we were able to negotiate, but we were surprised to find that even companies with a strong interest in risk management to the level of establishing a captive had not examined the “exclusion” in detail, and we were reminded of the importance of the expertise of captive consulting firms.

I have heard that many of the companies that have recommended the establishment of captives in Hawaii over the past few years, touting their tax savings, are made up of staff who have no experience in underwriting insurance at a property and casualty insurance company.

A journalist involved in the insurance industry told me the other day that “there are many captive consulting companies that have created captives by relying on insurance companies, and many of the captives that have been created do not have proper risk management, and it seems that the companies that created tax-saving captives are closing their doors due to the changes in taxation measures against tax havens.”

“There are many unqualified captives,” he said, and I am concerned that many of them may be defective rather than unable to fulfill their risk management role. On the other hand, I believe that this is one of the events that will deepen society’s understanding of what Global Link has been advocating: that captives should be established as a result of careful risk management.

Author/translator: Shinichiro Hatani