The Changing Nature of Property Insurance - Part I
All risks insurance has been with us for a long time and been used to describe a multitude of differing types of insurance including contractor's all risks and all risks transit insurance. In this article, however, it is intended to focus our attention on All Risks Property Insurance (from now on called "ARPI"), which has developed more recently. It is purchased particularly by large corporations and is sometimes described in the US as "Jumbo Risks".
This type of cover was available in the non-tariff market prior to 1982, but it was only after that date that the Fire Offices' Committee, as it then was, agreed to accept the inevitability of all risks cover for large commercial risks. After the formation of the Association of British Insurers ("ABI"), and the abolition of the distinction between tariff and non-tariff companies, the ABI form has been partially adopted but with so many variations, even amongst the standard forms, that it is impossible to state that there is a standard "All Risks" policy. Indeed, many policies may not refer to "All Risks" at all, or, if they do, do so only in the tide. Each policy deals in its own particular fashion with the issues which are common to ARPI.
Discussion will concentrate on the individual ARPI policy, but it is necessary to recognise that such cover will often be linked with a global scheme which may include a master policy and local policies. It may involve a captive insurer, in which case ARPI should really be called All Risks Property Reinsurance.
It is hoped, however, that by the use of a captive the All Risks Property Insurer will not be distanced further from the assured. The main purpose of any insurance has been historically to spread the risk. This has made good sense as insurance companies by themselves, or through the reinsurance market, have had a greater capacity to bear the risk. In the last 20 years, however, the traditional purchaser of this type of insurance has become larger and larger and more sophisticated. The Times listing of UK Corporations shows 50 corporations with turnovers in excess of £3,250 million for 1992 to 1993.