WAR, ALLIED PERILS AND TERRORISM INSURANCE

• WAR RISK INSURANCE
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War risk insurance is an insurance policy that provides financial protection to the policyholder against losses from events such as invasions, insurrections, riots, strikes, revolutions, military coups, and terrorism. Due to different political ideology and belief countries engage into war to occupy, seize and control by using force and military power. Consequences of war is destruction of lives, family and properties and leads to suffering of people.

Those entities which have risk exposure to the possibility of sudden and violent political upheavals requires aviation insurance policy holders to look for protection. Flights operating in politically unstable parts of the world have exposure to an elevated risk of loss from acts of war. War risk insurance may cover perils such as kidnappings and ransom, sabotage, emergency evacuation, worker injury, long-term disability, and loss or damage of property and cargo.

The difficulty with war risk insurance is the inability of an insurance company to accurately assess the possible outcome of damages and therefore calculate appropriate premiums to charge. Furthermore, the damage from war or related activities can be so vast and unpredictable that even high premiums might not be enough to cover the damage that insurance companies are liable for. This makes war insurance an unknown quantity for insurance companies with a high risk that a war insurance policy could send them into insolvency. Also, some policies may cover event cancellations due to war. There are war risk insurance policies that include acts of terrorism, but others consider terrorism and war to be two separate categories of peril. Some countries may require airlines to have war risk insurance before they can operate in their airspace or use their airports.

It is vital that insurance service providers clearly explain the wordings, exclusions, endorsements, clauses and write back provision to their clients so that there would ?be no misunderstanding and confusion when claims arise. In aviation insurance there is policy called war, allied perils and terrorism which is under the war risk policy. Airlines operating international and commercial flights would want to protect from incidents due to war and terrorism. The policy must be clear ??on what it covers and not.

Aviation policy clause (AVN48B) do not cover claims caused by:

A. War, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation of power. (War is a course of hostility engaged in by entities that have at least significant attributes of sovereignty. It is a real threat posed to the security of a state. Invasion is an incursion by an attacking army into a country e.g. Iraq invaded Kuwait in 1990.For persons to be classified as foreign enemies, there must be a war between the state of which the insured is a member and a foreign state. The term hostilities refer to acts or operations of war committed by belligerents; it presupposes an existing state of war but does not itself mean merely the existence of a state of war. The term warlike operations has a wider meaning than hostilities, and includes such?operations as belligerents have recourse to in war, even though no state of war exists. The acts must be done in the context of a war. Warlike operation is one which forms part of an actual or intended belligerent act or series of acts by the belligerent forces. It may be performed preparatory to the actual or acts of belligerency, or it may be performed after such act or acts. A civil war is a war which has the special characteristics of being civil, i.e., internal rather than external. There must be essence of war. There are three elements that need to be considered in the civil war context that is the opposing sides, the objectives of the sides and the scale of the conflict and its effect on public order and on the life of the inhabitants. The Oxford English Dictionary defines rebellion as an organised resistance to the ruler or government of one’s country; insurrection, revolt. An insurrection is a rising of the people in open resistance against established authority with the object of supplanting it. It is similar to rebellion but of an incipient or limited rebellion. Military and usurped power is something more in the nature of war and civil war than riot. It includes not only the acts of foreign enemies engaged in warfare within the realm or subjects of the nation engaged in external rebellion but also acts done by forces of the government in repelling foreign enemies or suppressing the rebellion.

B. Strikes, riots, civil commotions or labour disturbances (A strike is a concerted withdrawal of labour by employees done with a view to improving their wages or conditions, or giving vent to a grievance, or making a protest about something or other, or supporting or sympathizing with other employees in such?endeavor. Riots means where twelve or more persons who are present together use or threaten unlawful violence for a common purpose and the conduct of them(taken together) is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety, each of the persons using unlawful violence for the common purpose. It can be committed in private and public places. The term civil commotion has been defined as an insurrection of people for general purposes, not amounting to rebellion. Labour disturbances could be a strike and possibly a lock-out.

C. Any act of one or more persons, whether or not agents of a sovereign Power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional.(It must have certain acts that is attack on a person’s life which may cause death, attack upon the physical integrity of a person, kidnapping or hostage taking, causing extensive destruction to a government or public facility, a transport system, an infrastructure facility, including an information system , a fixed platform located on the continental shelf, a public place or????private property likely to endanger human life or result in major economic loss, seizure of aircraft, ships or other means of public or goods transport, manufacture, possession, acquisition, transport, supply or use of weapons, explosives or of nuclear, biological or chemical weapons, as well as research into, and development of biological and chemical weapons, release of dangerous substances or causing fires, floods or explosions the effect?of which is to danger human life, interfering with or disrupting the supply of water, power or any other fundamental natural resource the effect of which is to endanger human life.

C Any malicious act or act of sabotage (An act which is performed maliciously is one which is done with spite, or ill will. It implies an intention to do an act which is wrongful to the detriment of another. Sabotage has been defined as malicious destruction of or damage tp property so as to injure e.g. business or the military potential of a state.

D Confiscation, nationalization, seizure, restraint, detention, appropriation, requisition for title or use by or under order of any Government (whether civil military or de facto) or public or local authority. (The word confiscation means the removal or seizure of property by the government of a country in which the property is situated. Nationalization occurs where property is taken under the government control. Seizure is the act of taking forcible possession either by lawful authority or by overpowering force. Appropriation is the act of making a thing the property of a person. Requisition for title or use refers to the process whereby property is required to be made available to the military authorities of a state.

E Hijacking (Hijacking is committed by any person on board an aircraft in flight who unlawfully, by the use of force or threats of any kind, seizes the aircraft or exercises control of it.

F Any hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive or matter

Having ?excluded war and hijacking risks from aviation hull and liability all risks policies, the aviation market then introduced a “write back” provision by means of which an insured can obtain cover in respect of certain (but not all) of the excluded risks on payment of a higher rate of premium or of an additional premium. The risks which can be written back into a hull or liability all risks policy are controlled by the Extended Coverage Endorsements in respect of aircraft hulls and liabilities. If insurers across the globe use the AVN51(aircraft hull), the policy is extended to cover claims caused by the following risks:- (1) strikes, riots, civil commotions or labour disturbances; (ii) any malicious act or act of sabotage; (iii) Hi-jacking or any lawful seizure or wrongful exercise of control of the aircraft or crew in flight(including any attempt at such seizure or control) made by any person or persons on board the aircraft acting without the consent of the insured AVN 51(A) states that the aircraft must be in flight, all doors must be closed while embark and disembark. It was generally felt by insurers, however, that AVN48B and the AVN51 (Hull) and AVN52C (Liabilities) write backs were inadequate to deal with the threats posed by 21st century terrorists. Of principal concern was the threat posed by the use of Weapons of Mass Destruction (WMD). Whilst hostile nuclear detonations had been excluded, there was no corresponding provision in relation to chemical or biological attacks, ‘Dirty Bombs’, the use of Electromagnetic Pulses or indeed to the situation which arose on 11 September; namely , the use of civilian airlines themselves as WMD which needs to be focused seriously. There are other endorsements that need to be carefully studied such as ?Extended Coverage Endorsement (Aircraft Liabilities) AVN 52 amended, Extended Coverage Endorsement (aviation liabilities) ?AVN52C,Extended Coverage Endorsement (aviation liabilities) AVN52D,Extended Coverage Endorsement (aviation liabilities) AVN52E,Extended Coverage Endorsement (aviation liabilities- service provider) AVN52F & AVN52G,Extended Coverage Endorsement ( aviation liabilities-applicable to coverage provided to aircraft operators)AVN52R.

It is important to know and understand the endorsements when transacting aviation risks with clients. The war allied perils and terrorism insurance need to be carefully explained to clients. Aviation insurance policy holders will find the policy to be complicated and technical. It takes time to digest each and every word, clauses and terms. What matters at the end is customer satisfaction.

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