Lithuania Insurer Breaks Force Majeure Taboo with New Military Risk Cover

For decades, the standard commercial insurance policy has contained a non-negotiable clause: the exclusion of ‘acts of war’ and ‘political unrest.’ In the Baltic region, this ‘force majeure’ barrier is now being dismantled. Lietuvos draudimas, the largest non-life insurer in Lithuania and part of the influential PZU Group, has announced a shift in its underwriting strategy, moving previously ‘uninsurable’ geopolitical risks into the realm of standard business coverage.

The policy change is a direct response to a 12-month period of escalating regional anxiety. As businesses in Eastern Europe grapple with the proximity of the conflict in Ukraine and hybrid threats, the demand for tangible financial protection against non-traditional damage has reached a tipping point. The new coverage specifically targets risks that were once considered too unpredictable to model, including the use of military drones and state-sponsored sabotage.

Quantifying the New Risk Landscape

Under the revised terms, the insurer is providing a standardized 12-month protection window for a suite of risks that were previously excluded from property and business interruption policies. This is not merely an incremental update; it is a fundamental recalculation of what constitutes ‘insurable interest’ in a modern geopolitical context.

The following table outlines the specific risks now included in the expanded business asset and continuity coverage:

Simonas Lisauskas, CEO of Lietuvos draudimas, notes that the complexity of calculating these risks is high, as they involve ‘malicious human-initiated actions’ designed to cause maximum damage. However, the move is seen as essential for maintaining business continuity in a region where ‘external uncertainty’ is the new baseline for operations.

Implications for International Business and Continuity

For UK-based firms with operations in the Baltics or those managing supply chains through Northern Europe, this development changes the risk-assessment calculus. Previously, a drone strike or a politically motivated cyber-physical sabotage event would have left a business with zero recourse through traditional insurance, potentially leading to immediate insolvency.

The new provision can be applied not only to new contracts but also as an add-on to existing agreements covering buildings, equipment, and inventory. This flexibility is designed to bolster the resilience of medium and large-scale enterprises that are most vulnerable to regional instability.

However, there are caveats. The insurer has confirmed that maximum payout limits will be strictly tied to the specific field of activity, the size of the business, and the verified value of the insured assets. These are not ‘blanket’ policies; they are precision-underwritten instruments meant to mitigate the ‘unpredictability factor’ in long-term development.

A New Precedent for the Baltic Market

This move by Lietuvos draudimas—which holds a dominant position in both Lithuania and Estonia—likely signals a broader shift in the Central and Eastern European (CEE) insurance market. As part of the PZU SA group, one of the largest financial institutions in the region, the adoption of these terms suggests a growing confidence in the ability to price and manage geopolitical risk.

For the broader insurance industry, this serves as a case study in how the sector can adapt to the ‘new political reality.’ By moving away from the rigid ‘force majeure’ exclusions of the past, insurers are attempting to provide a safety net for the very events that modern businesses fear most. Whether this model is sustainable in the event of a large-scale regional escalation remains the primary question for analysts, but for now, it provides a much-needed layer of predictability for the Baltic private sector.

Source: BNS