LSW555D: Is it Time for Amendments?

Today, we are witnessing growing tensions in various parts of the world. Conflicts of varying intensity are escalating rapidly, posing a threat to air transportation, among other things. Airlines pay substantial amounts for war risk (re)insurance, hoping that in the event of adverse circumstances, War Underwriters will cover the losses. However, as we have seen, current (re)insurance terms do not always provide a clear answer to whether a particular event qualifies for a payout. Let’s consider a few examples.

1.??????? With the outbreak of hostilities in Ukraine and the ensuing sanctions and restrictions, the entire fleet of aircraft leased from companies around the world stayed in Russia. The lessors considered this event to fall under LSW555D, in terms of aircraft confiscation, which the Underwriters disagreed with. To this day, no one can provide a definitive answer as to whether this event qualifies as a covered claim, so we can only await court rulings.

2.??????? On April 15-16, 2023, fighting erupted between the army and the Rapid Support Forces in Khartoum (Sudan). As a result, aircraft at Khartoum Airport were either destroyed or severely damaged. Insurers promptly issued 7-day notices of cancellation of coverage for Sudan. However, the claims regarding the aircraft destroyed in the first few days did not raise any questions from the Underwriters. On the other hand, significant discussions arose concerning those aircraft that, for objective reasons, could not leave Khartoum Airport and were later damaged. Essentially, War Underwriters were trying to determine what the primary cause of the event was, when the consequences occurred, and whether there was a causal link between them (i.e., the composition of the valid claim). Different approaches in contracts regarding applicable law also added complications. In the end, Underwriters agreed to pay, but it required considerable effort from all parties involved.

3.??????? What is an airline to do when a particular state, let’s say, not exactly lawful, creates obstacles to its operations? Prohibits an aircraft from leaving the airport, initiates administrative or even criminal proceedings? From the perspective of LSW555D terms, all of this appears to be an exclusion, and the Airline can do nothing because they lack legal means to defend their rights. The result is the loss of the aircraft.

Thus, is it time for amendments? Should we reconsider the interpretation of certain terms and conditions (regardless of jurisdiction), define the timing and grounds for termination, and provide clear terms for airlines in the event of hostilities and the inability to objectively leave the conflict zone? I am confident that the insurance community has much to discuss; otherwise, it looks like a subscription that can be canceled at any time...