War Risks

What Does War Risks Mean?

War risks are problems and damages that come up as a result of a war. This includes issues like property damage from a battle, ransom payments for employees who have been kidnapped by rebel groups, property that is stolen by insurgents in a war zone, etc. Since 9/11, insurers have begun classifying damage from terrorism as a war risk as well.

Insuranceopedia Explains War Risks

Most insurance policies don’t cover damages from war risks. Insurance companies exclude these risks because they have the potential to cause so much damage in a short period of time, which could easily bankrupt an insurance company. For example, standard general liability insurance policies almost always exclude war and terrorism, which is why companies operating in unstable regions usually need to buy specialized coverage on top.

Some private insurance companies sell war insurance policies specifically designed to cover war risks. This coverage can be useful for people and companies who need to go to countries that are at war. Businesses with international operations sometimes pair these specialty war risk policies with a commercial umbrella insurance policy to extend their liability limits, though umbrella coverage also typically excludes acts of war. Travel agencies and tour operators booking trips to higher-risk regions often factor war risk exposure into their own coverage decisions, which affects the cost of travel agent insurance. However, there are some war risks that the private sector just won’t cover. In these cases, the government sells insurance for these risks. For example, private insurance companies won’t insure commercial airlines for terrorism so the Federal Aviation Administration sells this coverage.