Definition:All risks insurance
🛡️ All risks insurance is a form of property insurance — and in some contexts, marine or inland marine coverage — that indemnifies the insured against loss or damage from any cause not specifically excluded in the policy. Unlike named-peril policies, which enumerate each covered event (fire, windstorm, theft, etc.), an all risks policy shifts the burden of proof: the insured need only demonstrate that a covered loss occurred, while the insurer must point to a specific exclusion to deny the claim. This structure has made all risks coverage the preferred form for commercial property programs globally, particularly for large and complex risks where the universe of potential loss scenarios is difficult to enumerate exhaustively.
🔍 In practice, "all risks" does not mean "every risk." Policies invariably contain exclusion schedules that carve out losses arising from war, nuclear events, wear and tear, inherent vice, governmental action, and — increasingly — cyber perils and pandemic-related interruptions. The scope of coverage therefore depends heavily on the drafting of exclusions, and much of the negotiation between brokers and underwriters centers on narrowing or broadening these carve-outs. Across jurisdictions, the terminology varies: the London market has largely adopted the phrase "all risks of physical loss or damage" in its standard wordings, while U.S. commercial property forms may use equivalent language such as "special form" or "open perils." Under marine cargo placements, all risks coverage has been standard for decades, governed by Institute Cargo Clauses (A) in the London market and analogous wordings elsewhere.
💡 The all risks approach carries profound implications for both claims handling and reserving. Because the policy covers losses unless excluded, disputes frequently turn on whether a particular exclusion applies — making policy wording precision and judicial interpretation critical. Courts in common law jurisdictions such as the United States, England, Australia, and Hong Kong have developed substantial case law around all risks coverage, and divergent judicial interpretations of the same exclusion language can create materially different outcomes depending on the governing law. For insurers, the breadth of all risks coverage demands careful risk assessment, disciplined exclusion drafting, and robust aggregate monitoring, since unforeseen loss types can emerge that were not contemplated at the time of underwriting. The COVID-19 pandemic starkly illustrated this dynamic, as business interruption claims under all risks policies generated global litigation over whether virus-related closures constituted physical loss or damage.
Related concepts: