anything, described by RIMS as the American "legal virus'', is fast becoming the latest US export.

Canada, Australia and Western Europe are all showing symptoms of the virus, said Mr. Michael Wilmot, Director of Global Business Unit (UK) of Alexander & Alexander.

"There is now a much greater readiness to resort to the courts by both individuals and, in recent years, by groups of individuals acting together, particularly where they believe they have suffered injury or loss due to the negligence of others,'' he said.

"Court awards are much higher than they used to be and the strict liability concept has been introduced into legislation in Europe and Australia and shows every sign of breeding.

"A greater burden has fallen on insurers. The incidence and size of claims has increased and, whilst markets reacted only slowly to this because of competition and over-capacity in the 1980s, the price is now being paid for not standing more firmly at an earlier stage to beat off the virus.'' Lawyers outside the US, particularly those in Europe and Australia, have adopted a more aggressive approach to attracting clients who want to sue for injury or damage.

"In the UK, a degree of advertising by legal firms is now permitted by the Law Society and this `marketing' of services and ambulance chasing has encouraged people to resort more readily to legal action,'' said Mr. Wilmot.

With more European captive insurers coming to Bermuda, any significant increase in the size of legal awards and the quantity of lawsuits is of great interest to the Island.

Mr. Wilmot said the arrival of the American legal virus in other parts of the world has had several effects on non-US insurers.

"Firstly, there has been a substantial uplift in the monetary amount of cover considered necessary to protect commercial and industrial risks; 50 million ($75 million) may be the minimum now necessary for most large multinational companies,'' he said.

"Secondly, the need has grown for specialist liability covers such as D&O, PI and environmental liability to protect against the sophisticated types of legal action which were formerly only seen in US courts.

"These arise out of the alleged misconduct of commercial business operations, errors by professional persons and the now widespread, if sometimes ill-informed, concern about environmental hazards.

"Thirdly, the liability accounts of the major insurers both within and outside the USA have run into difficulties since their underwriting funds have not grown sufficiently over the past 20 years to meet the greater number and size of claims.

"The lifting of premiums has been hampered by the soft-market conditions worldwide, even though this position is now rapidly changing.'' The origin of how the US became such a litigious society, with all its effects on Bermuda's international insurance companies, most of which are owned by US corporations, is part political and part economic, said Mr. Wilmot.

"This was manifested in a reaction in the late 1970s and during the 80s against the activities of industrial corporations, part of a continuing anti-establishment movement which began as a backlash to the Vietnam War.

"This turned into a `consumerist' movement championing the little man against the perceived abuses of mega corporations and state capitalism.

"The US legal system, with its multiplicity of courts, jury awards of damages, varying state legislation and, above all, the contingency fee system, proved an all too easy breeding ground for the virus.

"Soon it became noticeable that US courts tended to favour injured parties in disputes over policy cover regardless of policy terms so that insurers became targets for attorneys seeking successful actions from which they could derive considerable income.

"Against this background, there appeared the concept of punitive damages, which although different in its objective from compensatory awards for injury or damage, was not at first excluded from policies.

"The attitude of US insurers was probably too slow and initially passive, probably because of market competition, so the virus took root in the system whilst at the same time sending off shock troops to spread the virus beyond the shores of the USA.

"Such were the emotional feelings generated by court actions and the size of the awards in the US that they began to attract the attention of the media at first in North America and then in Europe and elsewhere,'' he said. "Public attention quickly focused on the nature and outcome of actions for damages and there is little doubt that this led on to greater awareness by the public outside the US to the opportunity to seek redress via the courts,'' he said.

US law firms were easily able to find potential overseas plaintiffs.

"Their approach was to seek maximum sympathy and huge damages for their client, which were a great deal more than any previously known outside the US.

Some European law firms were quick to follow.'' One possible reason for the surge in US litigation during the 1980s was the widening gap between rich and poor, plus the spiralling cost of health care which led to plaintiffs seeking "scapegoats with deep pockets or protected by insurers with deep pockets''.

He said there is evidence over the last year to suggest that US courts are now less inclined to side with the injured party in lawsuits. But he said this change was in its early stages.

Insurance buyers, intermediaries and insurers are now more aware of the dangers of litigation and are better able to cope with them, he said.

But he said it was important for various factions to take a stand against the spread of the virus.

"Our legislators and the courts need to recognise that risk is inherent in life and that insurance is not an `all catching' charity that meets every shape and size of loss,'' he said. "Insurance will only be made available in the longer-term by the private sector if it is commercially sensible to offer cover, because the forward cost of risk can be calculated in some sensible way.

"The US virus has threatened to undermine the sensible calculation of the cost of risk and the biggest long-term sufferers will not only be businesses unable to find cost effective cover but, inevitably, the consumer who will pay more for his or her products, who will see their contents and motor insurance costs climb and who will see their company struggle in a competitive environment where Third World producers are unencumbered by our regulatory and `transfer seeking' costs.'' Mr. Wilmot added: "All of this reminds me of something once said by Tim McNamara, one-time Deputy Secretary of the Treasury under President Reagan.

"He said: `I find in Washington that when you ask what time it is you get different answers from Democrats and Republicans, 435 answers from the House of Representatives, a 500-page report from some consultants on how to tell time, no answer from your lawyer and bill for $1,000.'''