Insurers seek escape clause for computer timebomb

Insurance companies do not pay out for damage caused by war, terrorism or acts of God - and they are about to add the Millennium Bomb to that list. Otherwise they fear it could be like asbestosis, which caused huge losses for the Lloyd's insurance market. Charles Arthur, Science Editor, reports.

Anyone running a company which relies on its computer system should read the small print of any insurance renewal in the next year or two. It is likely to include a new "escape clause" which will list effects of the Millennium Bomb.

The Association of British Insurers (ABI) has hired the law firm of Cameron McKenna to investigate the effects that the "bomb" could have on its members, who insure billions of pounds of property and the livelihoods of many professionals. The company is drafting legal exclusion clauses and trying to assess the extent of the risks insurance companies face.

As 31 December 1999 approaches, businesses are likely to find it increasingly difficult to get insurance cover for properties and operations if they rely on computers. Those which have not made every effort both to become "millennium-compliant" themselves and to force suppliers and customers to follow suit could face soaring premiums - or even the total loss of cover.

"Companies which can show that they have made themselves compliant will be able to insure themselves against associated risks, such as the failure of their suppliers," an ABI spokeswoman said.

The Millennium Bomb arises because many computer systems may assume that after 1999, the next year is 1900.