Egypt:Insurance federation issues 11 strategic recommendations amid regional geopolitical risks

The Insurers Federation of Egypt (IFE) has published 11 recommendations to insurance companies covering maritime and transport risks, responding to on-going developments related to the US-Iran war, and the rapid repercussions on maritime and air traffic, international transport and trade routes.

The recommendations, published in the IFE’s latest weekly bulletin, included the following:

1. Strengthening the risk management and underwriting system and conducting periodic reviews of insurance policies and portfolios.

2. Paying special attention to insurance related to maritime and air transport, property, energy, engineering, liability, and other activities that may be affected by supply chain disruptions, closure of shipping lanes, changes in transport routes, or increased levels of security risks.

3. Strengthening the coordination and integration of the company’s underwriting, claims, reinsurance, risk management and legal affairs departments, to ensure a unified risk strategy from the insurance application until the claim settlement.

4. Periodically updating the data of customers, actual beneficiaries and related parties, and verifying the identity of all parties involved in the insurance process, the nature of their activities and the locations of their risk exposure, before issuing the policy, when collecting premiums, during the coverage period, as well as when reporting and settling claims, while taking into account full compliance with relevant regulatory and legal requirements.

5. Enhancing the competence and technical expertise of those responsible for examining and settling claims, particularly in cases where multiple potential causes of loss overlap. For example, damages may be caused by military operations, drone attacks, acts of sabotage, jamming of communication and navigation systems, or cyber incidents, which can make determining the direct and actual cause of the loss extremely complex. Therefore, the Union recommends strengthening technical investigation mechanisms, documenting the sequence of events, and, when necessary, engaging specialists, inspection experts, and independent technical bodies to help determine the cause of the loss and its relation to the covered risk or any of the exclusions stipulated in an insurance policy.

6. Conducting a comprehensive and periodic review of insurance policy wording, particularly definitions of war, riot, political unrest, terrorism, and cyber risks, as well as exclusions, limits, pre-cover conditions, geographical coverage, and provisions regarding risk notification and change of circumstances. Claim handling procedures should also be reviewed to ensure the clarity of required documents and evidence, thereby minimising the potential for disputes over coverage interpretation or liability for losses.

7. Thoroughly reviewing relevant reinsurance terms and agreements and verifying the consistency between the coverage provided to clients and the actual protection offered by reinsurers, particularly concerning war risks, political risks, and exposures resulting from sudden changes in shipping routes or increased risk levels in specific regions. Liability limits, exclusions, notification conditions, accrual provisions, geographical boundaries, and any other terms or restrictions that may affect the company's ability to recover reinsurance amounts in the event of a loss should also be reviewed. This is necessary to minimise the possibility of the company having an insurance liability that is not fully or adequately offset by a right to recovery from reinsurers.

8. Conducting periodic audits to assess the adequacy of insurance and reinsurance coverage in light of potential conflict development scenarios, including a wider geographical spread of events, a longer duration than anticipated, disruptions to maritime and air routes, and increased transportation, energy, and fuel costs. These reviews may include stress tests and hypothetical scenarios to measure the impact of such developments on insurance portfolios, liquidity, reserves,and the companies' ability to meet their obligations.

9. Enhancing communication and transparency by ensuring that clients are clearly and proactively informed about the scope, limits, and exclusions of insurance coverage, particularly in cases where operations may be affected by decisions to reroute ships or aircraft, delays in transportation, increased fuel consumption and costs, higher operating expenses, or lost revenue due to business interruption or disruption. It is also essential to clarify whether these costs and losses are covered by insurance, the conditions for entitlement to compensation, and the documentation required to prove the loss. This will strengthen the contractual relationship and minimise disputes during claim settlement.

10. Preparing clear mechanisms for dealing with emergencies and sudden geopolitical events, including defining the responsibilities of different departments, rapid exchange of information, and establishing effective communication channels with clients, brokers, reinsurers and experts, while maintaining accurate and up-to-date records of decisions and actions taken during periods of high risk.

11. Following up on instructions and warnings issued by regulatory and official authorities, and taking advantage of available information regarding high-risk areas and developments in shipping and transportation, in addition to monitoring changes in terms, prices and availability of reinsurance capacities, enabling companies to proactively update their underwriting policies and not just deal with the effects of the risk after the incident has occurred.

The IFE emphasised that dealing with the insurance implications of geopolitical developments requires a proactive approach based on continuous risk assessment, accurate information, coordination between different departments, clear coverage terms, adequate reinsurance protection, and rapid response to claims, while complying with applicable legislation and regulatory controls.