Canadian Underwriter

From nukes to export tangles, war shows need for custom covers

March 23, 2022   by Philip Porado

Russian manufactured guided missile launcher with three rockets, oriented towards west, ready for deployment

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Clients needing war, political violence or terrorism insurance may need to seek bespoke covers, noted a recent Ukraine technical update from claims manager Crawford.

“The purpose of a political violence policy is to dovetail with the commercial property policy and to indemnify those risks, within the political violence class, that fall within the standard exclusions in the commercial property policy,” the update noted.

The range of covers within political violence classes include:

  • Terrorism and sabotage.
  • Riots, strikes and civil commotion and malicious damage.
  • Insurrection, revolution and coup d’état
  • War and civil war.
  • Employee and general terrorism liability.

Typically, commercial property policies include war exclusions, which Crawford noted exclude losses or damages arising directly or indirectly from war.

“Underwriters will be reviewing policy wordings as well as the facts and circumstances surrounding a loss to determine whether the war exclusion is applicable to a particular claim and may decline claims where the war exclusion is found to be pertinent,” their update said.

The range of emerging risks – from Russia’s placing its nuclear forces on alert to forest fires inside the Chernobyl exclusion zone and a structure fire at another nuclear facility early in the war – illustrate potential impacts, including business interruption, property damage and contamination.

Crawford noted optional covers include chemical, biological, radiological and nuclear (CBRN), which covers liability and is offered on a worldwide basis for assets exposed to war, terrorism and political violence events.

Standard CBRN cover includes:

  • Property damage caused by blast or detonation of a CBRN weapon.
  • Decontamination and clean-up costs following a CBRN order.
  • Demolition and debris removal following a CBRN order.
  • Denial of access following a CBRN order.
  • Business interruption.

Present global risk levels mean political risk insurance may also merit review.

Among other things, these policies cover importer or exporter exposures in scenarios like stopping operations where exports are crucial to a business, or loss of products that only have value if they’re exported.

“As has happened with the banking and investment restrictions, political risk can respond when restrictions on foreign exchange prevents remittances relating to dividends, shareholder loan payments, intercompany payables and sale proceeds,” Crawford’s update noted.

There’s also a likelihood that businesses in Ukraine that buy western goods will default on payments, raising risks for trade credit insurers. Payment restrictions between Europe and Russia are also making insurers nervous about whether exports to Russia will be settled.

Trade credit insurance also typically carries a war exclusion.

“Specific wordings will require careful review,” the update said. “In these uncertain times, those insured entities with the benefit of some or all of these covers will be looking to insurers to provide certainty in relation to physical and financial losses to which they have been exposed.”


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