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Insurers face challenges from aviation grey zone conflicts

GPS spoofing and jamming are growing threats for insurers.

Grey zone conflict, where countries compete for influence and territory without triggering direct military conflict, is increasingly impacting the aviation insurance sector.

Recent incidents, such as sabotage at courier depots, are difficult to attribute to specific state actors, creating challenges for insurers, a WTW article said.

Insurance policies rely on precise language to clearly define liability, ensuring effective risk transfer. 

However, grey zone activities complicate this, particularly in aviation, where policies have evolved based on international conventions, “How can the insurance sector respond to emerging grey zone risk in the aviation industry?” by Jared Seth, wrote. 

Three key concerns for insurers and the aviation industry are GPS spoofing and jamming, aviation-related sanctions, and the implications of a nuclear detonation.

GPS spoofing and jamming are growing threats. Spoofing involves sending fake signals to mislead aircraft navigation systems, whilst jamming disrupts signals altogether. 

Although these activities haven’t yet caused an insurance claim, their occurrence could prompt disputes over whether the incident qualifies as a war peril. 

In such cases, insurers may invoke clause AVS103A, which allows for a 50% payout whilst the issue is resolved through arbitration.

Economic sanctions, such as those imposed on Russia following the Ukraine conflict, also complicate coverage. These sanctions include restrictions on insurance for aviation-related goods and services within Russia. 

Whilst the EU eventually issued clarifications, the lack of initial clarity caused significant challenges for insurers and airlines.

A more serious concern is the risk of nuclear conflict. 

War and terrorism exclusions in aviation policies are reinstated through hull war policies, but these can be automatically terminated if a nuclear weapon is detonated or if war breaks out between UN Security Council members. In the case of a nuclear event, policies could be voided, grounding commercial aviation worldwide. 

With multiple nuclear states and rising geopolitical tensions, the risk of such an event remains a significant concern for the global aviation industry.
 

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