As the conflict between Russia and Ukraine continues, heavy fighting is taking place in various parts of Ukraine, including near and in the capital, Kyiv. Military strikes and street-level battles have resulted in tragic loss of life and suffering for the Ukrainian population and caused significant damage to property in several regions.
Companies with interests in Ukraine can now review their property and political risk insurance policies to determine whether property damage or other losses can be covered. Here are some considerations.
Understanding “War Exclusion”
It is important to note that property policies taken out since the turn of the 20th century generally contain a “war exclusion” which will exclude coverage for losses resulting from acts of “war”.
Generally, a war exclusion means that the property policy would exclude loss or damage resulting directly or indirectly from “war”. Political language typically specifies exclusions as “war, hostile or warlike action in time of peace or war, declared or undeclared, including action to obstruct, combat or defend against actual, imminent or expected attack… by any government or sovereign power”. .”
Underwriters will review the wording of the policy and the facts and circumstances surrounding a loss to determine if the war exclusion applies to a particular claim, and may deny claims where the war exclusion is relevant.
Businesses experiencing a loss on property in Russia or Ukraine should always notify the appropriate underwriters, in conjunction with their broker, to ensure the claim is reported in a timely manner.
It is important to note that during this period of conflict, businesses may suffer loss or damage to their assets unrelated to the Russian invasion, such as losses caused by a storm, earthquake or flood. Customers will need to work with their insurance broker or advisor to review their policy wording to determine if coverage will be available in such cases. Underwriters will also analyze each case against the wording of the policy and companies should ensure that they notify their insurers of such losses in a timely manner.
Potential limits of political risk coverage
Businesses may have purchased a political risk insurance policy that extends coverage to “war”.
Companies that have purchased such coverage should review their political risk policy with their insurance broker or advisor to assess whether loss of property in Russia or Ukraine related to ongoing military action can be covered.
Note that underwriters will make the final decision on coverage once all facts and details have been gathered and submitted.
Penalties may affect insurance coverage and payments
Companies with assets in Russia can also review their property insurance coverage to determine if it could cover potential losses that are a direct result of the far-reaching sanctions imposed on Russia.
Note that regardless of the merits of a claim, some governments – including the US, UK and several European countries – prohibit insurers from providing coverage if that payment violates penalty laws. Moreover, even losses that occurred before the sanctions were instituted may be affected if the payment – made during the sanction period – violated a stipulated sanction law.
Whether you have real estate in Ukraine or Russia, it is important to work with your broker or insurance advisor to carefully review your real estate risk and policy policies to assess whether potential losses can be covered. It is also essential to report any losses to your underwriter(s) in a timely manner.