Redrawing the Lines Between Political Risk Insurance (PRI) and Political Violence Insurance (PVI)
A recent High Court decision in Hamilton Corporate Member Ltd & Ors v Afghan Global Insurance Ltd [2024] has reshaped how insurers interpret the boundary between political risk insurance (PRI) and political violence insurance (PVI). Traditionally, the distinction hinged on whether the actor was governmental or non-governmental. However, the judgment by Mr. Justice Calver offers a more nuanced framework: the true dividing line lies in the nature of the loss.
Political violence typically involves physical harm and destruction of property, while political risk centers on deprivation of possession or use – regardless of the actor’s identity. This reframing challenges entrenched market assumptions and underscores the importance of focusing on the actual terms of the policy rather than relying on commercial logic or industry norms.
The court emphasized that policy wording must prevail. Through established principles of contractual interpretation – including the perspective of a reasonable person and the assumed knowledge of commercial parties – the judgment rejected broader market narratives in favor of a close reading of the contract. This reinforces the need for insurers, brokers, and policyholders to scrutinize exclusions and bespoke clauses that may override typical expectations of cover.
Hamilton serves as a timely reminder that conceptual frameworks can aid understanding, but cannot replace precise drafting. Assumptions about how PRI or PVI “should” respond will be set aside if the language of the policy dictates otherwise.
For insurers and reinsurers, this decision provides a more robust foundation for assessing and negotiating coverage in politically volatile environments. It calls for a renewed focus on clarity, specificity, and legal precision – ensuring that coverage aligns with both the realities of risk and the expectations of the courts.
Read the full article here.