Y2k Costs Estimated at $15 to $35 Billion

Y2k Costs Estimated at $15 to $35 Billion

Myles, Donald L. Jr.
August 1999

In the June issue of "Best's Review" insurance actuaries estimated that defending coverage litigation for the year 2000 computer failures will cost property and casualty insurers between $15 and $35 billion.

Those estimates came from the actuarial offices of Miliman & Robertson, Inc., in New York. Their study says that they did not accept "doomsday" scenarios for business failures but they also did not look at the impact legislation might have on limiting litigation and insurance losses. They utilized published estimates to evaluate business interruption losses, business failures and accidents which may cause property loss or personal injury.

Using a prior report from the Gartner Group stating that 15% of companies and agencies will suffer at least one failure of omission critical system, Miliman & Robertson estimated the companies will sustain business interruption losses of $20 to $30 billion. Companies will then attempt to recover from all risk policies, third-party liability policies and systems designers errors and omissions policies. The report also estimates $4 to $8 billion for general liability claims, $2 to $5 billion for D&O claims, $2 to $4 billion for business interruption loss and $1 to $4 billion in E&O coverage.

The estimated legal cost to companies is between $5 to $10 billion.