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Air France and Transavia resumed their flights to Beirut on Thursday, after suspending them on July 29. Does this mean that Beirut International Airport (BIA) is now considered safe for civil aviation, despite ongoing hostilities in southern Lebanon? Is this an indication that reinsurance and insurance companies have revised their assessment of the war risk affecting the Lebanese capital?
In an interview with This is Beirut, conducted anonymously, an insurer explained that the resumption of flights to Beirut by some airlines doesn’t necessarily mean the war risk has been eliminated. It does not provide definitive proof that Beirut’s airport facilities won’t be targeted by the Israelis. The insurer clarified that the extent of war risk coverage for aircraft or buildings depends on the specific terms of the insurance contract agreed upon by the parties. What guarantees are offered, what are the limitations, and under what conditions?
High Risk
Reinsurers and insurers consider war a high and undesirable risk, preferring to avoid conflict situations altogether, according to the same source. Insurance policies, typically annual, can be purchased at any time, whether before or after the onset of armed conflict. However, in times of war, premiums for both insurance and reinsurance rise significantly. Since southern Lebanon became involved in the Gaza conflict—just two days after hostilities began on October 8—premiums for war risk insurance on Lebanese buildings and aircraft have been steadily increasing. “During certain weeks, insurers and reinsurers outright refused to provide war risk insurance for Lebanon as violence reached its peak,” the insurer adds.
Increasing the Deductible
In the face of war risks, it is common for insurers and reinsurers to raise both the insurance premium and the deductible. The deductible is the amount the insured must pay out of pocket before the insurer covers the rest of the claim costs. For example, if the deductible is $500 and the total repair cost is $2,000, the insured pays the first $500, and the insurer covers the remaining $1,500. Essentially, the deductible splits the risk between the insured and the insurer.
In summary, the deductible is a key factor affecting the cost of insurance and the amount the insurer will need to pay in the event of a claim. It represents a balance between the level of protection desired and the premium the insured is willing to pay.
Stray Bullets
Regarding coverage for incidents involving stray bullets hitting the fuselage of an aircraft in flight over Lebanon or stationed at Beirut International Airport (BIA), another industry expert explains that such incidents are generally covered if the insurance policy includes protection against “political violence.” However, they would not be covered if the policy is limited to “passive war.”
Political violence typically includes events such as riots, revolutions, and other forms of political unrest, while passive war is a more restrictive concept, referring to damage caused by acts of war but only under specific conditions.
The Case of MEA
Despite the difficult circumstances, Middle East Airlines (MEA), the national carrier, was the only airline to continue serving Beirut International Airport (BIA) for a long time after the start of the armed conflict in Gaza. Although it had to reduce its flight frequency, it made sure to schedule daytime flights and maintain services to all its destinations except Basrah in Iraq, according to its CEO, Mohamad al-Hout.
MEA faced challenges in negotiating insurance policies for its fleet, which forced it to park some of its aircraft at foreign airports. Under the leadership of its CEO, the Cabinet, in coordination with Acting Governor of Lebanon’s Central Bank (BDL) Wassim Mansouri, decided to cover
potential damage related to war risks.
“Admittedly, Lebanon is in default, and that consequently the state might not be able to meet its obligations in the event of damage to the MEA. However, this is a moral guarantee,” Mohamad al-Hout stresses. He adds that “if anything untoward were to happen, the responsibility would at least be shared by the whole state”.
