KARACHI, Jan 18: The reinsurers continue to ignore the request from insurance companies to provide them cover against terrorism and sabotage.

Sources in the insurance sector told Dawn that the reinsurance treaties signed between local insurance companies and global reinsurers for 2003 continue to exclude reinsurance coverage against terrorism and sabotage. They say that the reinsurers have also capped the maximum exposure in case of natural calamities for 2003.

Some insurance companies had pleaded to reinsurers to review their policy before entering into reinsurance agreements but the reinsurers declined to provide cover against any kind of terrorism and sabotage.

But as the insurance companies are free to provide this cover to their clients on their own one or two of them have started offering this facility.

Sources in insurance companies say that Adamjee Insurance Company Ltd. has given terrorism cover to its corporate clients on net account though the exposure is low. Insurance companies normally have a combination of reinsurance treaties which vary with type and quantum of risk being insured.

Reinsurers generally started tightening terms of reinsurance after 9/11. But the most significant among all the changes made thereafter was the imposition of stricter calculations for maximum probable loss (MPL). For the purpose of MPL calculations risks have been divided into certain categories that carry different weightages.

Sources in insurance companies say this has reduced the risk absorption capacity of insurance companies. So they may have to seek facultative reinsurance for managing larger risks this year.

They say that the reinsurance treaties now being signed have clauses that say that these would automatically stand cancelled in case of war or armed hostilities in the insurers or reinsurers countries. Further more an immediate cancellation of treaties can also be served by either party if it suffer losses on its paidup capital; is winding up; in case of breach of contract or if the business of the other party is acquired, controlled or administered by another company.