Indo-Pak tensions trigger rise in war insurance cover enquiries from firms

Most commercial insurance policies exclude war cover but companies are seeking protection under aviation, marine and political violence categories amid rising tensions

The heightened tension between India and Pakistan in recent weeks has prompted an increase in enquiries regarding “war cover” from Indian companies and individuals alike, said industry insiders.

 

That said, insurance brokers pointed out that 'war' is typically excluded from insurance coverage, except in the case of marine and aviation policies.

 

According to insurance experts, commercial lines, including property, fire and other segments, do not cover “war”, as war on land is historically a standard exclusion. However, “war cover” may be bought under marine hull and cargo, and aviation segments.

 

The geopolitical tensions between the two countries have led customers to enquire more about war cover for infrastructure.

 

Insurers believe that if war is covered under commercial lines, it would trigger higher claims for insurance companies, resulting in losses. They also say such events are difficult to predict, making modelling challenging for insurers.

 

“Post the India-Pakistan tensions, there have been a few inquiries from our clients on war cover. Unfortunately, there has been no solution. Globally, war is a standard exclusion in other policies – property, liability, etc. So if damage occurs due to war-like situations, it will not be covered. Insuring critical infrastructure involves huge sums, and if damaged, can severely affect an insurer’s balance sheet. Hence, these are intentionally excluded,” said Rushik Patel, Associate Director – Liability, Edme Insurance Brokers.

 

As policyholders’ queries on war cover increase, insurance companies are also looking to offer alternative solutions, including protection against political violence or standalone terrorism cover. 

 

Political violence provides cover for war-like situations, and in the current case, war was not declared. It also provides cover for sabotage and terrorism. There is also standalone terrorism cover. If policyholders want insurance beyond these, they will have to approach the international market.

 

“There has been significant anxiety in recent days, and that has led to multiple enquiries. Clients want to assess whether the current war-like situations are covered under their existing policies. If not, they’re seeking to understand what alternative solutions are available. Corporates are looking at alternative solutions including political violence cover or standalone terrorism cover,” said Deepak Madan, Head – Commercial Lines, Large Account Practices at Prudent Insurance Brokers.

 

Furthermore, insurance companies continue to cautiously observe the developments and are also likely to make wordings more stringent in new policies or renewals. Distributors believe insurers are likely to include phrases that broaden the scope of exclusions.