Normally, that means working closely with the three dozen insurers with which BASF holds policies. But when it came to planning for the Year-2000 computer bug, Mr Jaeger was on his own. "I didn't have time to wait for the insurers to come to us," he said. "We knew we had to get started on this back in 1996." And after two years of debugging and double-checking BASF's operations, Mr Jaeger learned that some of his carriers were considering excluding coverage for potential millennium-related damages. "So I brought them in and showed them all of the tests we'd done," he said. "I tried to impress that we, even if we can't say we're totally sure what will happen, we're 99% sure.And that satisfied them."

Many European insurers have been scrambling of late, seeking shelter from the potential avalanche of liability claims that Year-2000 computer glitches may trigger -- only to find it may be too late to get defensive. The hands-off approach may have worked with well-prepared multinationals like BASF, but with the thousands of smaller companies that form the backbone of Europe's economy, the insurers' delayed response could prove disastrous.

``European insurers have been slow to react, and the companies they cover are even less aware of the Year-2000 problem," said Stephanie Moore, a Giga Information Group consultant ``A lot of people are simply in denial, and that compounds the entire problem for their insurance companies."

No one knows what the final bill for the millennium bug will be, but the risk to insurers could be enormous. Nearly everyone with a commercial insurance policy -- landlords, corporate directors, producers, suppliers -- faces liability if things go awry.Lawyers at a Lloyd's of London conference last year estimated global claims could top $1 trillion.

The millennium bug is likely to sting more in Europe than in the US, and even parts of Latin America and Asia. Until recently, European governments and companies were distracted by preparations for the euro's debut, delaying efforts to address possible Year-2000 problems. And European economies are dependent enough on sophisticated computer systems that a glitch could set off a chain reaction of breakdowns across a tightly knit web of suppliers, producers and distributors. Gartner Group estimates that between 33% and 50% of Continental companies will experience some kind of shutdown, health hazard or large financial loss in the first few months of 2000, compared with 15% of those in the US and the U.K. ``The big companies are much more aware, but when you look at all of the others in the supply chain, you start to worry," Ms Moore said. "I don't think it's going to be Armageddon (when the Year-2000 arrives),but there's going to be a lot of trauma."

It's easy to see how damages could spiral. Consider the car industry, which is built upon supply chains and just-in-time production. An Italian engine maker must shut down in January after out-of-date embedded computer chips halt production. No more engines means no more production for the car maker it supplies, which can't deliver to its dealers. The dealers' sales plunge; they sue the car maker, which then sues the supplier. Losing its biggest contract, the supplier goes out of business. Shareholders sue the car maker and its officers, accusing them of failing to foresee the disastrous chain of events.

In the UK, many general insurance companies have introduced exclusions into policies barring coverage of damages caused by the millennium bug. In the Netherlands, 85% of the members of the Dutch association of insurers have set up a one-billion-guilder ($508.1 million) reinsurance pool to help cover their corporate clients' Year-2000 losses such as power ortelecommunications failures, fire damages or machinery breakdowns. Most of the remaining members are divisions of foreign-owned companies.

But in other European countries, insurers have been nearly as slow as their corporate clients in reducing their Year-2000 risk. Whereas U.S. insurers started writing exclusion clauses into policies as early as 1996, most European insurers, taking the same tack, began informing policyholders only in the past six months, risk-management consultants say. According to a government survey of German insurers last year, the majority already had started debugging their own computer systems -- but few had begun looking at ways to reduce their risk to liability claims.

Those that have tried face other obstacles. One is a weak commercial-insurance market where fierce industry competition has forced insurers to make property, directors and officers, and general-liability coverage steadily cheaper and more comprehensive over the past several years. Rather than lose a customer,some insurers have underwritten broad coverage of potential Year-2000 damages, says Sven Heinrich, senior vice-president for underwriting controlling at German reinsurer Hannover Rueckversicherungs AG. Another roadblock to reducing risk is already built into the contract law of some countries. Unlike in the US and the UK, for example, German insurance policies automatically renew themselves each year, giving insurers little opportunity to alter policies or introduce Year-2000 exclusions.

The Wall Street Journal