Political risk is normally excluded under most reinsurance treaties.

Political risks include War, Civil war, mutiny, terrorism, sabotage, nationalization, currency inconvertibility, etc.

Since property policies usually cover Riot, Strike, Malicious Damage (RSMD), these are not normally excluded from the reinsurance treaties.

However, some treaties have the following wording under Political risk exclusion (please note that only part of the wording is being quoted below):

“Any act, including but not limited to labour disturbance, lock-out, riot or strike, which is calculated or directed to bring about loss or damage in order to further any political aim, objective or cause, or to bring about any social or economic change, or in protest against any State or Government, or any political or local authority, or for the purpose of imposing fear in the public or any section thereof”.

“For the purposes of clauses ——-, any loss or damage occasioned directly by a labour disturbance, lock-out, riot or strike or in order to bring about any social or economic change which is not politically motivated as envisaged in clause — shall not be excluded”.

Normally in direct policies, such a differentiation between “political aim” and “social and economic aim” is not elaborated.

Further, in today’s world, every RSMD can be shown to have some political aim. Hence, disputes can arise at the time of claim.

To add to the problem, the exclusion wording further adds:

“In any action, suit or other proceeding where the Reinsurer alleges that by reason of these provisions any loss, damage, cost or expense is not covered by this Reinsurance Agreement, the burden of proving that such loss, damage, cost or expense is covered shall be upon the Reinsured”.

Onus of proof on reinsured.

Blog by Atmaram Cheruvu