There's a lot of uncertainty about how much the Year 2000 computer problem will cost the insurance and reinsurance industry, but everyone is attempting to write in exclusion clauses to protect their bottom lines.

Even with the exclusion clauses, however, the cost to the industry could be in the "tens of billions'' according to one actuary at a seminar on the subject yesterday.

Local lawyer Jan Wolonieki mirrored the uncertainty saying the Year 2000 problem will either turn out to be a damp squib that doesn't affect the industry despite the hype, or could be the biggest catastrophe ever in terms of dollars lost.

"I think either the American legal profession is seriously deluded or it is going to be the biggest thing to hit the reinsurance industry,'' Mr. Wolonieki told a seminar on the subject yesterday.

Others in panel discussions predicted that billions of dollars in claims and legal costs could hit the industry next year if the computer problem leads to a loss of business or causes property damage.

The Y2K problem refers to a glitch in computer software and hardware in the way dates are read. With the change over to 2000 many computer systems are expected to fail or produce errors.

Ted Dew of Tillinghast-Towers, Perrin said the losses were difficult to estimate but could range anwhere from the $15 billion cost of the Northridge earthquake, to the $40 billion in losses from asbestos claims.

He said the losses could lie somewhere in the "middle ground'' in the "tens of billions'' of dollars.

Actuary Simon Lambert of PriceWaterhouseCoopers in Bermuda said he believes most of the losses to insurers and reinsurers will come more from legal fees paid to defend against claims rather than from actual payouts.

Insurers and reinsurers are also uncertain about how claims will be handled according to different policies. They expect most of the claims will fall under comprehensive general liability and directors and officers policies.

Another unknown factor is whether coverage claims will extend to prior years.

Comprehensive general liability insurance companies could be hit for coverage for equipment, such as computer chips, that had been sold and installed prior to 2000.

Pamela Martin, XL Insurance Co. Ltd. senior vice president for claims, said the company expects to see lots of legal activity regarding professional liability claims. Some wondered if clauses excluding the Y2K problem from coverage were going to work. Ms Martin said the uncertainly revolves around the way damages and claims can be considered to be expected.

"We don't know what is really going to happen,'' she said.

Billions in claims feared Mr. Wolonieki said the insurance industry had not really learned how to clearly word policies so as to protect companies from claims they didn't want to cover.

"Y2K doesn't raise any new questions of law,'' he said. "The legal issues are the same as in pollution. The question is whether the insurance companies have learned any thing from pollution litigation and improved its contract wording.'' From the example of insurance contracts in dispute in the UK he doesn't think so and cited a 1989 House of Lords comment that the Lloyd's J1 form was "inelegant and ungrammatical...and obscure.'' The House of Lords went on to say that "the only people who can expect to profit from the obscurities of the present form J1 are the lawyers''.

Chicago-based law firm Lovell, White, Durrant hosted the one-day Year 2000 (Y2K) workshop to get the industry up to speed on how to handle claims arising from the problem.