Many are now asking the insurance sector to stand by the victims of the dramatic explosions of the Port of Beirut and to bear the cost of necessary reparations. It has been cited that the insurance companies are expecting approximately 10,000 claims in relation to the explosion.
Any person or corporate entity who suffered from physical damages or property damages – e.g. to their homes, vehicles, businesses, or other insured properties – may have a claim under the insurance policies related thereto. All coverage claims will however be put on hold at this stage, seeing as insurance companies are now waiting for the investigation’s results, and more precisely, for the direct reason behind this incident. Furthermore, the coverage will in all cases depend on the applicable terms and conditions of each policy.
Was it an accident? Was it an act of war?
As mentioned above, the determination of whether the insurance companies will have to cover the damages resulting from this explosion will mainly depend on the terms and conditions of each insurance policy.
It is essential to note that insurance policies usually do not cover losses arising from acts of war. Such type of incidents is usually listed within the exclusion section of most insurance policies. Should this explosion be qualified as an accident, and in order for the victim to obtain compensation from insurance companies, the relevant policies should also include coverage from such types of accidents, e.g. explosions, fires.
In respect of insurance covering the Port Warehouse No. 12, it will be essential to confirm whether the relevant insurance policy would allow the storage of dangerous material, and in the affirmative, whether the tons of Ammonium Nitrate were stored in pursuance of the terms and conditions set out in such a policy.
Accordingly, the investigation results will determine whether the insurance companies will have to cover the damages caused by the explosion and to what extent.
Will the Lebanese insurance companies be able to cover all the damages resulting from this explosion?
The Insurance Control Committee (‘ICC’)
which is the regulatory authority in charge of the supervision and control of the insurance sector in Lebanon, has requested the insurance companies to process and assess all the claims related to the explosion in pursuance of the terms and conditions of the applicable policies. The ICC has assured the public that it will closely monitor the claims handling by the insurance companies. For that purpose, the ICC has requested the insurance companies to submit a weekly report on the progress of the claims.
The Association of Insurance Companies in Lebanon – known as ‘ACAL’
has also assured that the Lebanese insurance companies will abide by the terms of the applicable policies and cover the damages in pursuance of the relevant regulations and that the Lebanese insurance companies are deemed to be adequately solvent. This is especially so because most of the said companies are reinsured by multinational foreign reinsurance companies, which usually bear most of the risk.
The insurance companies are currently facing some unfounded attacks from several parties in the media for ‘being late’ on settling the claims of the victims. The insurance sector is being pressured to support the cost of the repairs, regardless of the terms of the applicable policies and procedures.
The insurance sector was struggling in the past year due to the financial crisis, and as with most other Lebanese private sector industries, it was impeded by the banking restrictions. The Lebanese insurance companies, which were barely able to settle reinsurance premiums to the foreign reinsurance companies due to the current banking restrictions, will now most likely have to face an increase of said premiums. Some insurance companies might have not been even able to renew their reinsurance arrangements. Thus, the coverage of the explosion damages will likely have a negative impact on the solvency of the insurance companies as well as on their relationship with their reinsurers.
The insurance companies should surely honor their obligations towards the victims of the explosion in pursuance of the terms of the applicable policies, but should also not cover for the duties and responsibilities of the Lebanese government in this respect.
Having said that, the private sector seems to have to pay, once again, the price of the negligence and incompetence of the Lebanese government. Instead of supporting the insurance sector, which is one of the very few alive sectors in Lebanon, it has been left alone to fight another battle.
