Cargo insurance is an evolving product that must adapt to changes in the global environment. Whether these changes are physical, political, or financial, underwriters have long been tasked with protecting the solvency of their industry through updated policy wording. Oftentimes, this is achieved by adding new clauses aimed at addressing certain emerging risks that could have detrimental effects on insurers, should a catastrophic event occur.
One such clause that has emerged more recently is the Five Powers War Clause. This new clause addresses war risk insurance and, per AIMU wording, “excludes loss, damage, liability, or expense arising from the outbreak of war (whether there be a declaration of war or not) between any of the following: United States of America, United Kingdom, France, the Russian Federation, the People's Republic of China.”
Hypothetically speaking, the outbreak of war between two or more of these Five Powers could potentially result in claims that are beyond the resources of insurers on a global scale, thus posing a risk to the industry overall. While war risk is nothing new to the world of cargo insurance, underwriters are taking this step to mitigate the potential impact of a large-scale loss. However, how this clause would be applied to a potential cargo claim is still unclear.
Ever since the humble beginnings of cargo insurance, policy forms have been evolving to keep up with the developing world around us. Wording endorsements such as the Marine Cyber Endorsement, Communicable Disease Exclusion, and Five Powers War Clause are the insurers’ way to help them avoid catastrophic financial losses that could not only render them insolvent, but also have a major impact on the cargo insurance industry overall. ECIB is here to help our clients understand detailed policy wording that can impact their business. Reach out if you would like to discuss more about policy clauses or would like help reviewing your current policy.