Intervention by state power

"State power" is defined as individuals or organisations exercising public or supranational authority see Cl. 2-8 (b) and Cl. 2-9, sub-clause 1.

The combined effect of Clauses 2-8 and 2-9 is that intervention by the vessel's "own" state is not an insurable peril. This means that intervention by the state of the vessel's registration (normally also the flag state) is not covered by any insurance. The reason is that the intervening state should compensate the owner (e.g. for requisition for title or use). The insurance market was concerned that if the owner was covered by insurance, the flag state might more easily decide not to compensate the owner since his loss would be covered by the insurer.

However, if the flag state is neither the state of registration, nor the state where the major ownership interests are located (which requirements a flag of convenience state could conceivably meet), it would qualify as a "foreign state" under Cl. 2-9(1) (b) and interventions such as capture at sea, condemnation in prize, confiscation etc. would be covered by war perils insurance.

It should be noted that requisition for title and use by any state power is not be considered an intervention. Requisition is excluded from coverage regardless of whether the requisition is carried out by the vessel's "own" state or a foreign state power. Thus an important and practical type of government intervention is excluded from cover.

This exclusion of requisition from cover may lead to some uncertainties. Cl. 2‑9 (1)(b) mentions capture at sea, condemnation in prize and confiscation as interventions by foreign state powers which are covered by war peril insurers. The distinction between confiscation and requisition is that the owner is not compensated by the confiscator, whilst he should be compensated by the state power requisitioning the vessel, see the Commentary to Cl. 2-9.