Upgraded to a Buy Recommendation - Per-Occurrence War & TRIA Liability Insurance

02/01/2022 Written by: Stuart Hope

The world at large seems to be on the edge of war more and more with violent war like acts becoming commonplace in the news. The aviation world is no exception, only the risk profile is exponentially higher in terms of loss exposure. It’s probably high time you added per-occurrence war and TRIA liability coverage to your aviation insurance portfolio if it hasn’t been added already. 


This gets a little complicated but stay with it as there is key information to consider. Liability coverage under an aircraft insurance policy has two separate components: primary liability coverage and war risk liability, each with its own associated premium. Unlike the primary liability coverage, which applies to all covered losses under the policy, the war risk liability coverage only applies to losses resulting from the specific war related perils (war, hijacking, terrorist acts, confiscation, riots, and civil commotion, etc.). The primary liability coverage limit is written on a per-occurrence basis, which means the full liability coverage limit applies to each occurrence that takes place during the policy period. The war risk liability coverage, however, is written on an occurrence/aggregate basis, which means the limit of liability does not reset with each occurrence. Once cumulative war related liability claim payments during a policy term total the policy’s liability limit, coverage is exhausted.


To further confuse matters, for any aircraft owner that carries a liability coverage limit in excess of $50M, their coverage for any loss caused by one of the War Risk perils has a sub-limit. That is, coverage for bodily injury liability to persons outside of the aircraft and property damage liability is limited to $50M. The higher overall liability limit they purchased is only applicable to passenger bodily injury liability.


Example:  Assume an aircraft owner carries a $200M liability limit including war risk coverage. On a trip, a disgruntled co-pilot who sympathizes with a terrorist cause takes control of the flight from the Captain and flies the aircraft into a skyscraper. There are numerous fatalities in the building, millions of dollars in damage to the structure itself, and all five passengers on board the aircraft are lost. In the lawsuits that follow, the aircraft owner will have full access to the $200M liability coverage for bodily injury lawsuits brought on behalf of the passengers.  Coverage for claims related to persons injured or killed in the building as well as the property damage to the building, however, will be restricted to $50M.


Recommendation:  For a reasonable additional premium, you can purchase per-occurrence war risk insurance that includes the provisions of the Terrorism Risk Insurance Act. I include TRIA because if you buy the per-occurrence war coverage it is also highly recommended to  pick up the TRIA coverage for a very small delta in premium.


By purchasing the per-occurrence War and TRIA, your $200M limit now applies to all covered losses, no longer contains any sub-limit for bodily injury claims to persons outside of the aircraft or any property damage claims and removes the aggregate limit so the full $200M limit is available during a given policy term. In addition, you pick up the benefits of TRIA coverage [e.g., cannot be cancelled except by the government, occurrence based, coverage trigger dictated by three U.S. officials and not insurance contract language, etc.]


When you consider how much money you spend on aircraft maintenance alone, the additional premium here will seem inconsequential for the peace of mind it provides now that you understand what you are getting. In the past, most war risk related events predominately seemed to occur away from our soil. The world is changing, and we must adapt to the proximity of these threats.


Don’t leave this type of large loss to chance, and contact one of your trusted AssuredPartners Aerospace team members today.

Two red and white planes in a dimly lit hangar
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