August in Bermuda is the month of the "Cup Match" weekend when the island takes a four day holiday to play cricket and gamble (usually at the same venue). August also sees the mass exodus of the island's expatriate reinsurance workers to their home countries (particularly the UK, US and Canada) and a time when many in the industry will be using August to recharge their batteries in advance of the impending renewals season and the Monte Carlo Rendez-Vous.

One apparently good piece of news for the reinsurance industry in August was a legal judgment in Mississippi in which it appeared as though US insurers had won the first round of "wind versus water" legal disputes over hurricane Katrina claims (see Article on pg 36). In what may be seen as a landmark judgement in Mississippi, Judge Senter upheld the flood exclusion on a policy whereby a policyholder was claiming coverage for water damage resulting from hurricane Katrina’s winds blowing water into a policyholder's home. This case is one of hundreds of such disputes expected to be heard in US courts and is seen as a benchmark given that Judge Senter is set to act as judge for the majority of cases in Mississippi.

It is an encouraging verdict given the public and political attention focused on claims payments and insurance coverage in Hurricane-prone US states. Indeed, many in the insurance industry had concerns that public pressure might receive "right-of-way" over agreed contractual terms - Senter's judgement has made it clear, at least in the first instance, that the flood exclusion does apply to storm surge losses. No doubt it remains to be seen if this judgement is the "beginning of the end" or rather just "the end of the beginning" in terms of resolving this major insurance issue.

This Viewpoint item appeared in issue 108 of JTW News - September 2006

Author: Mike Morrison - KPMG