LONDON-London insurers face a $21 million claim on a key man life insurance policy taken out by Gianni Versace S.p.A. covering designer Gianni Versace, who was killed last week.
The 50-year-old Italian fashion designer was gunned down last Tuesday morning outside his Miami Beach, Fla., home. As a mark of respect to the business' founder, hundreds of Versace stores around the world were shut Tuesday and Wednesday, and a fashion show scheduled for last Wednesday evening in Rome was canceled.
Last year, the Milan, Italy-based Versace business, which produces couture and pret-a-porter clothing, perfumes, fashion accessories and home wares, had estimated sales of 1.71 trillion lire ($1 billion). The company is family-owned: Mr. Versace held 45% of the shares, while his sister, Donatella Versace, owned 35%, and his brother, Santo Versace, held the balance. Plans to list the organization on the New York and Milan stock exchanges next spring may now be shelved.
Charles Boyd, an underwriter for the R.J. Kiln & Others syndicate at Lloyd's of London, confirmed the syndicate led the company's key man coverage. He said the syndicate had not received a formal notification of loss by the end of last week.
Mr. Boyd declined to give the policy limits., though London market sources confirmed the sum covered as 35 billion lire ($21 million).
Sylvestro de Besi, director of broker BDB Ltd., part of London broker Ballantyne, McKean & Sullivan Ltd., confirmed he had placed the key man policy in the London market.
Personal accident underwriters in London expect a surge of interest in key man coverage as a result of the slaying of Mr. Versace.
Key man life insurance is purchased by a company to protect itself from financial losses caused by the death or disability of a key employee.
"Every time this sort of thing happens. . .it creates a lot of awareness," though demand soon returns to normal levels, said Brian Jackson, life underwriter at Cassidy Davis Underwriting Ltd. Mr. Jackson did not expect personal accident rates to rise as a result of the killing.
Mr. Jackson predicted the claim would be "fairly straightforward" and that it would be paid quickly, subject to any specific conditions.
London market personal accident underwriters currently offer policy limits up to about 20 million pounds ($33.5 million). Above this level it is difficult-though not impossible-to purchase coverage, calling into question the viability for key man policies for certain businesses.
In Mr. Versace's case, his organization was closely identified with his flamboyant personality and lavish lifestyle. Stock analysts are concerned the company may take a large-if not mortal-blow from his death, in which case the proceeds of key man coverage may prove irrelevant.
Nevertheless, key man coverage is often required by investment banks involved in a business, or at the point where a company is engaged in an initial public offering and the underwriting investment bank wishes to protect its exposure.
"It is quite often a condition of lending," said Cassidy Davis' Mr. Jackson.
London market executives speculated that other Versace insurance policies could be in place and have been triggered by the killing.
The Versace organization may have purchased cancellation cover for last week's fashion show, which was to have been held on the Spanish Steps in Rome and broadcast on Italian television. Mr. Versace was well-known for his extravagant shows featuring top models.
David Stirling, a director of London broker Crispin Speers & Partners Ltd., which specializes in cancellation coverage, said that if a policy was in place, it would be for "quite sizable sums insured." As a start, the cost of contracting the models would be "very expensive," he said, and then the staging, lighting, sound systems and the like would add up to "a hell of a lot of risk." A standard abandonment policy covers non-appearance and cancellation and very likely would be triggered by Mr. Versace's death, said Mr. Stirling.
Also, there could be cancellation coverage for other events, such as personal appearances, said Robin Walsh, assistant special risks underwriting manager for Royal & Sun Alliance Insurance Group P.L.C.
In general, the main risks for cancellation coverage for fashion businesses are non-appearance of the designer, flood or fire at the venue, and terrorism, said Mr. Walsh, who added that Royal & Sun Alliance does not write the Versace account.