War Risk Insurance

Definition

War risk insurance is a type of insurance which covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. Some policies also cover damage due to weapons of mass destruction. It is most commonly used in the shipping and aviation industries. War risk insurance generally has two components: War Risk Liability, which covers people and items inside the craft and is calculated based on the indemnity amount; and War Risk Hull, which covers the craft itself and is calculated based on the value of the craft. The premium varies based on the expected stability of the countries to which the vessel will travel.


War Risk Insurance

What is ‘War Risk Insurance’

A policy that provides financial protection against losses sustained from occurrences such as invasion, insurrection, revolution, military coup and terrorism. Auto, homeowners, renters, commercial property and life insurance policies often have act-of-war exclusions, meaning that they will not pay for losses caused by war-related events. Because war risk may be specifically excluded from a basic insurance policy, it is sometimes possible to purchase a separate war risk insurance policy.

Explaining ‘War Risk Insurance’

War risk insurance makes the most sense for entities that are particularly exposed to the possibility of sudden and violent political upheavals. For example, companies operating in politically unstable parts of the world are exposed to an elevated risk of loss from acts of war. War risk insurance can cover perils such as kidnapping and ransom, emergency evacuation, worker injury, long-term disability and loss or damage of property and cargo. Some war insurance policies also cover acts of terrorism, but others consider terrorism and war to be two separate categories of peril.

Further Reading