6 ms·

Why should "act of war" not be covered? If I'm going broke because of a war, why shouldn't my insurance company? Similar, with natural disasters, those should

• CPLX 8y ago
  Because insurance companies are generally in the business of insuring unsystemic risk. The entire model breaks down in cases of systemic risk, unless that has been accounted for and dealt with. Which is why it's a major element of insurance policies.
  • daniel-cussen 8y ago
    In Chile the insurance companies have fine print saying they won't cover injuries resulting from paramilitary activities (reasonably sensible, OK) or anything nuclear, right down to a nuclear bomb.
    • jhbadger 8y ago
      Even in the US it is common for home insurance to not cover nuclear war -- mine specifically says it doesn't for example. Although I suspect not getting an insurance settlement would be the least of my concerns in that event.
  • jopsen 8y ago
    Today you can insure against systemic risk through re-insursnce in other countries.. this should be a benefit from globalization, right? So why we keep allowing insurance companies to make these exclusions? If there is systemic risks to the entire planet, then an insurance company should just go bankrupt.. I mean the survival of a company isn't very important if we talking about the apocalypse :)
    • edanm 8y ago
      > So why we keep allowing insurance companies to make these exclusions? In general, we don't have to "allow" contracts between two private parties to happen. We can "not allow" (i.e., outlaw) certain contracts, but an insurance company and a private party can (and should!) set up the contract between them however they please. Especially in a case like this, where the contract is huge, and probably had teams of lawyers from both sides going over all its details.
• jeremyjh 8y ago
  It should not be covered because there is a statement in the policy that it is not covered. The only controversial thing here is whether or not this actually was an act of war, and that is something the insurance company must prove.
  • k__ 8y ago
    What does prove even mean in that context?
    • deleted 8y ago
      [deleted]
    • benologist 8y ago
      That the insurance company feels comfortable nobody will punish them for stealing your money. Their business model is who can they get away with not helping really.
      • jaggederest 8y ago
        Actually most insurance companies pay out more money in losses than they take in via premiums. The real business models for insurance companies isn't underwriting profits, it's arbitraging the time value of money (pay premiums now, pay claims later) via investing the float.
        • a1369209993 8y ago
          That's not more money though; that's less money exchanged into a weaker (more inflated) currency. Four pounds isn't more than three kilograms just because the number is larger.
        • nradov 8y ago
          That might have been true at some point in history but is no longer possible in a ZIRP environment.
      • 8y ago
• vharuck 8y ago
  IIUC, it's because a war would likely cause harm to a large number of clients at the same time. The insurance company could not afford to pay so many concurrent claims. Which makes this case even more important: how could any insurance company guarantee to pay damages caused by a computer virus, when many viruses are designed to quickly spread across many systems?
  • pushtheenvelope 8y ago
    > IIUC, it's because a war would likely cause harm to a large number of clients at the same time. The insurance company could not afford to pay so many concurrent claims. disclaimer, I know nothing about the insurance industry, but for sake of intellectual argument: insurance companies already have to deal with scenarios like this e.g. home earthquake insurance in California. They do this by re-selling the income and risk from their policies in the "re-insurance" market. This spreads the risk out to counter-parties (who are in the other parts of the US and the world) who buy this stream of income+risk. In turn, those counter parties are probably buying the income+risk of all kinds of insurance policies from different geographies so any one event of earthquake or war is less likely to catastrophically affect them.
    • freewilly1040 8y ago
      Yes but even though you might be able to sell “act of war” insurance, like earthquake insurance it wouldn’t be something covered by a generic policy
      • jopsen 8y ago
        But maybe it should be! Why do we allow these exclusions in the contracts? I'm sure we have regulation on what can and cannot be part of the insurance terms.
• Spooky23 8y ago
  Because these institutions have mostly transitioned from mutual insurance companies to public companies. Their duty is to shareholders vs policy holders.
• HillRat 8y ago
  It arose in the context of maritime shipping, and so was essentially an analogue to floodplain exclusions — i.e., “If you’re going to sail in defiance of a likely sinking or seizure by a hostile power, don’t expect us to make you whole.” It later was included by convention in property and casualty contracts as well. In the US, at least, Zurich’s attempt to wriggle out of payments would be an uphill battle at best — there are unfavorable judgments in the context of international terror attacks, as well as (in Multi-Foods vs United Commercial) Russian seizure of goods. In the absence of actual war or war-like activities (such as Korea or Vietnam), hard to see how they win. But, hey, even a 5% chance of victory is probably worth the cost of litigation.
• thb567 8y ago
  I think that the direct loss of lives due to the action and a permanent damage to critical to very important infrastructure is the current guideline to declare a hostile act from a nation state as an act of war