Brokers association: Your general insurance doesn't cover war

INSURANCE is supposed to cover people against measurable and random risks. As such, people seek to buy insurance for financial protection and peace of mind.

However, war is a different story.

War can lead to an unpredictable, unprecedented and unimaginable scale of losses which could wreak havoc on insurer solvency.

This is why the Insurance Brokers Association of TT (IBATT) has advised in a media release shared on December 11, that their general insurance would not be able to cover losses in the event of war, political violence or terrorist attacks.

With recent geopolitical tensions brewing in the region and concerns over the possibility of military conflict near TT’s shores, IBATT has noticed an up-tick in questions from customers on whether their insurance can cover damage caused by war, political violence or terrorist attacks.

IBATT said while your general insurance may not cover war, special insurance coverage would be necessary.

“We have gotten questions in writing from clients, inquiries from clients looking at possibly purchasing coverage for war, terrorism and sabotage,” said Navin Dookeran, IBATT executive board member. “We also have had individuals asking about it. It is at the forefront of people’s minds and they are asking if something were to happen, what would go on with my insurance.”

He said news of growing conflict between TT and Venezuela may have prompted people to ask about war coverage.

“It comes back to what the media and the news puts forward. If it is on the news all the time, and it is across all the media, and all the feeds people will naturally get concerned and start asking questions. One thing would lead to the other and people will eventually start reaching out to insurance providers and brokers because they are seeing it all the time.”

The media release said most insurance policies contain an exclusion clause saying that the policy “does not cover loss, damage, cost or expense directly or indirectly caused by, contributed to by, resulting from or arising out of war or related perils.

“This exclusion exists because war losses are catastrophic and unpredictable, making them difficult to price or insure sustainably; reinsurers exclude these perils, preventing local insurers from including them in standard treaty protections; the cost of war damage can be financially devastating and could bankrupt insurers if included under normal coverage and voluntary exposure – such as participation in armed conflict or residence in declared war zones – removes the uncertainty required for insurability,” the release said.

The release added that specialised war risk or political violence insurance can be obtained under specific policy forms. Examples of these kinds of insurance include marine hull and cargo policies, which provide standard institute war strike coverage; aviation and commercial property policies that may include optional extensions for war, terrorism and political violence; malicious damage from riots, strikes, insurrection, coup d’état and similar events.

Dookeran told Newsday that full coverage can be done for the value of one’s property and the insurance coverage for war is similar to any other type of insurance.

“It works like any other insurance. If there are losses, claims are paid out from the insurance company. They will assess that overall history over a period of time and if the losses are too high in relation to the premium they will then take the rates up.

“The key thing is ensuring that you have coverage in the first place. If war is to happen and it is officially declared as a war, you will have to determine if your insurance policy will respond.”

He said while local insurance companies do not regularly offer war coverage, brokers can contact foreign companies to produce a plan.

“You can approach your broker and ask for war coverage for your property, you can give them the sum of the property you want to insure and they will go out and seek a price for you. Just like home insurance every insurer’s price is different and because a typical property insurance would cover a wide range of perils – hurricanes, floods, earthquakes and so on – war cover tends to be less than a typical property policy,” he said.

The release said while war coverage is available in many countries some are excluded.

For example, countries such as Iraq, Yemen and Afghanistan are not covered for war insurance because of ongoing conflicts and political instability.