All Hull policies are subject to a War Risks exclusion clause, usually based on Lloyd’s Clause AVN48B, which currently reads as follows:

This Policy does not cover claims caused by

(a) War, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation of power.

(b) Any hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

(c) Strikes, riots, civil commotions or labour disturbances.

(d) Any act of one or more persons, whether or not agents of a sovereign Power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional.

(e) Any malicious act or act of sabotage.

(f) Confiscation, nationalisation, seizure, restraint, detention, appropriation, requisition for title or use by or under the order of any Government (whether civil military or de facto) or public or local authority.

(g) Hi-jacking or any unlawful seizure or wrongful exercise of control of the Aircraft or crew in flight (including any attempt at such seizure or control) made by any person or persons on board the Aircraft acting without the consent of the Insured.

Furthermore this Policy does not cover claims arising whilst the Aircraft is outside the control of the Insured by reason of any of the above perils. The Aircraft shall be deemed to have been restored to the control of the Insured on the safe return of the Aircraft to the Insured at an airfield not excluded by the geographical limits of this Policy, and entirely suitable for the operation of the Aircraft (such safe return shall require that the Aircraft be parked with engines shut down and under no duress).

AVN48B

(Note: A newer version of AVN48B is currently under consideration and will, in addition to the existing perils, also exclude losses arising from the hostile use of radioactive contamination or matter (e.g. dirty bombs), or the hostile use of an electromagnetic pulse, or the use of chemical or biological materials for political or terrorist purposes.

There are two ways of “writing back” (i.e. covering) some of the perils excluded by AVN48B.

One – which provides limited coverage – is an endorsement to the Hull policy called the Extended Coverage Endorsement (Aircraft Hulls) AVN51. The other is a separate “Hull War Risks” policy, usually based on Lloyd’s Policy Form LSW555B.

There are SIGNIFICANT differences between the two products and we, as insurance brokers, have ALWAYS recommended that our clients purchase the “full” coverage (LSW555B), for very good reasons, some of which are outlined below.

AVN51, which provides a limited writeback as an endorsement to the Hull policy, reads as follows:

Notwithstanding the contents of the War, Hi-jacking and Other Perils Exclusion Clause forming part of this Policy, it is hereby understood and agreed that this Policy is extended to cover claims caused by the following risks:-

(i) Strikes, riots, civil commotions or labour disturbances;

(ii) Any malicious act or act of sabotage;

(iii) Hi-jacking or any unlawful seizure or wrongful exercise of control of the Aircraft or crew in Flight (including any attempt at such seizure or control) made by any person or persons on board the Aircraft acting without the consent of the Insured

PROVIDED ALWAYS THAT

1. The above extension shall only apply to the extent that the loss or damage is not otherwise excluded by (a), (b), (d) and (f) of the War, Hi-jacking and Other Perils Exclusion Clause

2. the limits of Insurers' liability in respect of any or all of the risks covered under this endorsement shall not exceed the sum of .................................................(in the aggregate during the Policy period)

3. The Insured has paid or has agreed to pay the additional premium of ..............................required by the Insurers in respect of this extension

4. The insurance provided by this endorsement may be cancelled by the Insurers giving notice effective on the expiry of seven days from midnight GMT on the day on which notice is issued.

AVN 51

The aspects to bear in mind in considering AVN51 (limited writeback) as an alternative to LSW555B (full Hull War Risks insurance) are as follows:

(a) Under AVN51, coverage only applies to losses arising from the perils enumerated in paragraphs (c), (e) and (g) of AVN48B. Coverage under LSW555B includes losses enumerated in paragraphs (a), (c), (d), (e), (f) and (g). Only perils under paragraph (b) (nuclear, etc.) are excluded under both.

(b) Furthermore, even if a loss appears to be covered by AVN51 (a malicious damage for example), it will be excluded if the loss is also categorised as a peril under paragraphs (a), (b), (d) or (f) of AVN48B. For example, imagine an aircraft is damaged during strike action at an airport. “Strikes” are excluded under paragraph (c) of AVN48B and are “written back” in AVN51. However, if the strike is aimed at bringing about a change of government (rather than workers seeking higher wages from the airport company), this would constitute a political act and would be excluded under paragraph (d) of AVN48B. So such losses would be excluded under AVN51 but covered under LSW555B.

(c) AVN48B also excludes ALL losses arising whilst the Aircraft is outside the control of the Insured by reason of any of the perils set out in AVN48B. So, for example, if an aircraft is parked at an airport when a riot breaks out, with the result that the Insured cannot access the aircraft, it is “outside the control of the Insured”. If the aircraft were then damaged by, say, hail or a storm which struck the airport during the riot, the Hull coverage would not apply. Under AVN51, there would be no relief. However, LSW555B covers claims excluded from the Hull "All Risks" Policy from occurrences whilst the Aircraft is outside the control of the Insured by reason of any of the above perils set out in AVN48B.

Another example would be where an aircraft visits a foreign country and, owing to a breach of local laws by the pilot (he became involved in a brawl at a local pub), the aircraft is detained by the authorities and is struck by lightning during a storm, or is damaged when struck accidentally by an airport vehicle. Such losses would be excluded because the aircraft was “outside the control of the Insured”.

(d) Under AVN51, Insurer may cancel coverage at any time by giving 7 days’ notice. Under LSW555B, Insurers may only cancel by notice the end of each period of three months from inception.

(e) Under LSW555B, coverage includes indemnity in respect of any payment properly made in respect of threats against the aircraft or its passengers or crew and extra expenses necessarily incurred following confiscation, etc or hi-jacking, etc of the aircraft.

So, if the coverage provided by AVN51 is so restricted, why does the clause even exist, you may ask?

The answer is, simply, that AVN51 does have a role to play in certain parts of the world, particularly those which are considered “stable” and where political activity is conducted in a peaceful manner. If an aircraft is restricted to operations within that country (the United Kingdom, for example), the coverage provided by AVN51 may well be all that is every going to be required…until al Quaeda or the Provision IRA decide to start planting bombs at airports, etc.

South Africa, and most of Africa for that matter, there has been a long history of political violence, not to mention civil wars, terrorism, etc., and the argument in favour of LSW555B-based coverage over the AVN51 option is overwhelming.

This is particularly so in respect of any aircraft which might fly into another country, where the risk of a detention or confiscation of the aircraft on spurious grounds is ever-present.

Unfortunately, as long as AVN51 is available without a premium loading there will be Insurers and broker alike that will try to advance the theory that full War Risks coverage is an unnecessary premium expense.

Nothing could be further from the truth and the records are full of examples of losses which, but for full War Risks insurance, would not have been covered.

The average annual cost for LSW555B coverage, for aircraft operated privately within South Africa and neighbouring countries, is around R50-R75 per R100,000 in value. This makes LSW555B coverage not only affordable but virtually a no-brainer, given the vast difference in coverage offered between the two options.