Is a loss of property during the war an insured event?
Author: Oleg Kachmar, Partner, Attorney-at-Law at Vasil Kisil & Partners
Yes, it is, but only if the property was insured against military risks. That is to say, in 99.9% of cases, in fact, it is not.
Before 2014 it was not a routine case in Ukraine to insure property against military risks. The Ukrainian insurance market, for the most part, did not offer such insurance product. It was done only in a few isolated cases that nobody was aware of, not to speak of the fact that it was done on the terms of reinsurance. But those were, more often than not, exceptions.
Moreover, after the annexation of Crimea and the beginning of military actions (armed conflict) in Eastern Ukraine, insurers and, first of all, foreign reinsurers, began to wonder whether the events in Ukraine were a war. After all, as we can recall, at that time the Ukrainian authorities did not dare to call a spade a spade… ATO. Not war. No martial law or the state of emergency was imposed in Ukraine.
In February 2014, russian federation troops invaded and occupied the Autonomous Republic of Crimea which is a territory of Ukraine. At that time, the russian federation did not acknowledge its involvement and presence of its military forces on the territory of Ukraine. After the withdrawal of Ukrainian troops from the Crimea, russian troops approached the eastern border of Ukraine. During the period of the conflict, continuous shelling of the regular Ukrainian army and heavy fights over strategic sites such as Donetsk airport took place on a regular basis. Thus, the russian federation initially invaded, occupied and annexed the territory of Ukraine, and later launched numerous attacks on the Ukrainian military forces, thereby committing an act of military aggression against Ukraine. Although the russian federation has not openly acknowledged its involvement in the conflict in Ukraine, there is ample evidence that russian soldiers, tanks and anti-defense forces were present and were fighting against Ukrainian troops in Eastern Ukraine.
Since 2014, some companies that had a business in Eastern Ukraine, in the area of ATO or near the demarcation line, have started to insure their businesses against political risks, fearing the loss of business (property, assets) as a result of military actions in Eastern Ukraine. Business in Eastern Ukraine turned out to be in a maximum danger due to the ongoing active military actions.
On the 24th of February, the situation radically changed…Now the whole world can see that Ukraine is in the middle of war, a real war, and not some “special military operation”. The number of residential buildings, schools, hospitals, food stores, oil depots, high voltage power lines, electrical power stations, gas pipelines and other infrastructure facilities, totally destroyed (demolished) as a result of fighting, artillery rocket strikes and airstrikes launched by the enemy, has already reached several thousands.
In addition, there is also the threat of nuclear attack and the use of chemical weapons by the enemy.
Thus, what used to be excluded from the insurance coverage (was not considered an insured event) – loss (destruction, damage) of insured property as a result of military actions, manoeuvres or other military measures; removal or destruction of insured property by order of the state authorities; impact of nuclear energy, technological accidents, contamination or contamination of territories – now is the main insurance risk, against which the property must be insured. All in all, not only the property.
But since the war is raging in the country, today hardly anyone will dare to insure property, even in areas that are now relatively peaceful, because the risks of events that require insurance for property are extremely high. Property insurance is understandably impossible (excluded) in areas where active fighting is now taking place. Insurance risks have already set in there.
At the same time, insurance of property, assets, businesses, road, transport and agricultural infrastructure, and other facilities against military-political risks (military action, aggression (invasion or attack of foreign armies on Ukrainian territory, occupation or annexation of a part of Ukrainian territory), wars (declared or not declared warfare between two or more nations, countries or states), political violence (coups d’état, assassinations, revolutions, civil war), the impact of a nuclear power, technological accidents, contamination of territories, etc.), could be an effective tool in the system of actions that will be conducted in order to restore the economy and rehabilitate the destroyed objects.