War risk insurance is insurance that provides compensation for economic losses caused by war and other forms of political or large-scale violence. In addition to insuring against damages caused by acts of war states, this type of insurance also encompasses internal conflicts, such as insurgencies and civil wars, and acts of terrorism, such as bombings and hijackings. In some cases, it also covers damages caused by weapons of mass destruction. It is most commonly bought for commercial ships and aircraft, but it can also be used to insure other property or personnel at risk due to violent conflicts.
War risk insurance exists as a separate category because most conventional insurance policies providing coverage for damages caused by accidents, crime, or natural disasters specifically exclude damages caused by warfare, rebellions and other internal strife or terrorist attacks. Normal insurance also does not provide compensation for government seizure; nationalization of property; property damage; or injury from weapons of mass destruction, such as nuclear bombs and radiological weapons.
The primary customers for war risk insurance are airlines and shipping companies. Insurance for ships or aircraft themselves is called war risk hull insurance, while insurance for the crews, passengers, and cargo is called war risk liability insurance. Other businesses can also buy insurance to cover damage to property, such as buildings or equipment, in countries where a conflict is ongoing, terrorist attacks are considered a major risk, or where the risk of violence is high due to political instability.
War risk insurance can also provide compensation for injuries, disabilities, or deaths suffered by personnel as well as risks such as kidnapping for ransom. In addition to for-profit companies, relief organizations sometimes buy war risk insurance for employees since the nature of the work of such groups can require personnel to be in lawless areas or combat zones. Aid workers are also sometimes at risk because they may be seen as valuable hostages or targeted for intimidation or assassination for political reasons.
Like other forms of insurance, such as health or vehicle insurance, the cost of war risk insurance varies according to the value of the property being insured and the estimated risk. Insurance for dangerous or unstable areas is more costly, with insurance companies maintaining lists of countries considered high risk. Rates for maritime shipping also depend on the shipping route and are influenced by factors such as pirate activity.
