Part 3: What’s Covered (and What’s Not) Under AFB 1–8 Political Violence Insurance

Demystifying the AFB 1–8 Series — Part 3 of 5 - read part 1 & 2 here

Disclaimer: This article is for educational purposes only and does not constitute legal or insurance advice. Coverage is subject to the specific terms, conditions, and exclusions of each policy.

This series is based on the AFB 1–8 political violence insurance wording, widely used in the Lloyd’s and specialty market. Other forms — such as Hiscox 1–5 — are available, but we use AFB 1–8 as a reference point for clarity and consistency.

Think you’re covered for political unrest? You might be — but only if you understand the scope.

It’s not enough to buy political violence insurance and hope for the best. AFB 1–8 defines coverage in very specific terms — and there are real limits on what’s included, what’s excluded, and how loss is measured.

In this post, we explore what’s actually covered under AFB 1–8, where common gaps occur, and why many risk managers only discover the fine print when it’s too late.

The time to understand your cover isn’t after a crisis — it’s before.

✅ What’s Typically Covered Under AFB 1–8

If a listed peril causes direct physical damage, the following are typically covered:

1. Buildings and Contents

Assets the insured owns or is legally responsible for, including:

• Buildings, fixtures, equipment, and fit-out

• Stock and finished goods

• Signage, plant, and machinery

• Underground assets (if specifically declared in Schedule 2)

2. Debris Removal

Necessary and reasonable costs incurred by the insured to remove debris directly caused by a covered peril — separate from the valuation of property damage.

3. Suppression Damage (Perils 1 & 2 Only)

AFB 1–8 extends to cover physical loss or damage caused by government or military forces actively suppressing an act of Terrorism or Sabotage (Perils 1 & 2), provided:

• The suppression occurs during the covered event

• The damage results directly from suppression actions

• The insured has purchased cover for Perils 1 and/or 2

• Any applicable government compensation scheme is exhausted first (the policy is excess of such schemes)

4. Business Interruption (If Endorsed)

If the business interruption extension is purchased, cover may include:

• Loss of income resulting from physical damage caused by a covered peril

• Ongoing expenses and necessary payroll

• Reasonable costs incurred to reduce the loss

• Up to 12 months of indemnity, subject to due diligence and a valid property damage trigger

⚠️ What’s Not Covered (Unless Explicitly Endorsed)

• Looting or theft, however if endorsed, it occurs as a direct result of a covered peril, such as Riots or Civil Commotion

• Cyberattacks or digital sabotage (unless a mobile phone is used to trigger a physical explosion)

• Confiscation, expropriation, or nationalisation by government authorities

• War between nuclear powers (China, France, Russia, UK, USA) — automatically excluded

• Chemical, biological, or radiological attacks

• Loss of electronic data (except for the cost of blank media and copying from backups)

• Consequential losses like market value decline, delay, or denial of access — unless tied to a valid BI claim

• Property excluded by default, such as currency, securities, animals, aircraft, watercraft, and vacant buildings (30+ days)

🧾 How Losses Are Valued (Net Loss)

AFB 1–8 calculates claims based on “Net Loss”, which is defined as:

• Buildings and contents: The cost to repair, replace, or reinstate (whichever is least), subject to depreciation unless reinstated

• Stock: Based on cost of raw materials and labour, or finished goods at selling price minus deductions

• Media: Only the cost of blank media and the cost to copy data from backups — no value attributed to the data itself

• Declared Values: If under-declared by more than 10%, claims are reduced proportionately (Declared Values Penalty applies)

🔄 Suppression vs. Counter-Insurgency: Don’t Confuse the Two

One of the most misunderstood aspects of AFB 1–8 is the difference between Clause 2.3 (Suppression Damage) and Peril 8 (Counter-Insurgency). Both involve government or military force, but they operate very differently.

Feature	Suppression Clause (Clause 2.3)	Peril 8: Counter-Insurgency
Trigger	Military suppressing Terrorism or Sabotage	Military targeting insurgents, guerrillas, revolutionaries
Linked Perils	Applies only to Perils 1 & 2	Cannot respond if Perils 1–7 caused prior damage
Timing	Must occur during the covered event	Must be the first and only cause of loss
Coverage Type	Extension of Perils 1 & 2	Separate, standalone peril
Limitations	Excess of government compensation	Automatically excluded if another peril triggered damage first

Example: If a riot damages property, and military action causes further loss, Counter-Insurgency is excluded.

If a terrorist act is in progress and military suppression causes damage, Clause 2.3 applies, assuming Peril 1 is listed.

🧱 Can You Scale Back Coverage? Yes — But Be Strategic

AFB 1–8 is flexible. You can buy cover for just Terrorism and Sabotage, or add SRCC for a mid-tier layer of protection. This is common in more stable markets or for budget-sensitive placements.

However, if you’re purchasing wider perils like Insurrection, Rebellion, or War, it’s strongly recommended to keep the underlying perils (1–4) in place. Here’s why:

• These threats often escalate from one peril to another

• Stripping out base perils creates blind spots in the early stages of a crisis

• Claims depend on identifying the proximate cause — which is often blurred in real-world events

A peaceful protest becomes a riot. A riot sparks rebellion. If your policy doesn’t include each layer, you may find yourself uninsured when the claim hits.

⚠️ Critical Note for Risk Managers

Under AFB 1–8, only the perils listed in Schedule 1 are covered. If a peril isn’t purchased and specifically listed, there’s no coverage, even if it feels relevant in hindsight.

Don’t assume you’re covered — confirm it. A missing peril, an outdated declared value, or a misunderstood trigger could be the difference between recovery and loss.

🔜 Coming Next: Conditions, Triggers & Claim Pitfalls (Part 4)

We’ll explore:

• Notification timelines

• Due diligence obligations

• Subrogation and co-operation requirements

• And the small print that can quietly void a claim

At Resilient Frontiers, we believe resilience is built on clarity.

The time to understand your cover isn’t after a crisis — it’s before.

Stay Resilient