As aircraft and other assets face increasing exposure to regional conflicts, policyholders and insurers are already diverging over how losses should be interpreted. Chloe Derrick (pictured), partner at Stewarts in London, specialising in policyholder insurance disputes, said policyholders need to understand what their policies actually cover before a loss occurs, not after.
The impending Court of Appeal decision on the AerCap litigation is the most significant pending development for anyone holding war risk cover. Following the Commercial Court's June 2025 judgment awarding just over $1 billion to aircraft lessors whose jets were stranded in Russia, war risk insurers were granted permission to appeal on March 31, 2026. A five-day hearing is to be listed.
Its outcome will directly shape how war risk cover is interpreted for future aviation claims, including those that may arise from the Gulf.
“The appeal is going to be of general importance for policyholders with war risk policies globally, where there's a dispute over whether there's been a total loss of an asset as a result of a conflict,” Derrick said.
The central issue is what constitutes permanent deprivation of possession and how chances of asset recovery should be assessed. Insurers argue claimants must show “no more than a mere chance” of recovery, a higher bar than the balance of probabilities standard applied at first instance. If that argument succeeds, the threshold for establishing a total loss rises significantly.
Current losses in the Gulf are primarily tied to business interruption, including rerouting costs, airport disruptions and increased fuel expenditure. But the physical damage picture is more complicated. Defensive action in neighbouring jurisdictions is causing shrapnel to fall on assets stored in warehouses and hangars, while standard aviation hull policies do not cover ground-based assets.
New products have entered the market providing war risk cover for aviation spares on the ground, addressing a gap the conflict has made increasingly visible. Policyholders without such cover in place may have an unaddressed exposure.
“Policyholders with aviation assets need to review their policies and run different types of scenarios,” Derrick said, “particularly when looking at territories outside of the direct conflict zone.”
On business interruption, many policies exclude war risks as standard. Even where cover exists, disputes around how limits apply across multiple entities, an issue heavily contested during the Covid-19 BI litigation, are likely to resurface if the conflict continues.
“The Iran war is going on for a much longer period than anyone was told it may do at the outset,” Derrick said. “This is going to be a huge business interruption stress test.”
The grip of peril doctrine prevents insurers from escaping liability once assets are already caught up in a war peril, even after a cancellation notice is served. In practice, however, the principle is becoming increasingly contested. Conflicting statements from political leaders about ceasefires and war status create uncertainty around when a peril begins and ends, with direct consequences for when cover attaches and when it can legitimately be cancelled.
Attribution presents a parallel problem. Exclusions in some cyber policies require a state-backed attack to be attributed by the government of the country where the damage occurred. A declaration on social media from a foreign leader does not meet that threshold.
“If we suffer a cyber attack in the UK and Trump goes on Truth Social and says that attack was clearly from Iran,” Derrick said, “unless the attack was attributed to a state by our government, then Trump’s statement would not be sufficient to satisfying the exclusion clause.”
On sanctions, the position most frequently misunderstood is that a sanction suspends an insurance entitlement rather than extinguishing it. Insurers relying on sanctions to withhold payment must also make reasonable efforts to obtain a licence from the sanctioning authority. Passive non-payment is unlikely to be sufficient.
As geopolitical instability expands beyond traditional conflict zones, Derrick said the central lesson for policyholders is increasingly straightforward: understand how war risk wording, attribution clauses and sanctions provisions operate before a loss occurs, not after a claim is disputed.
