Regulatory framework in Lebanon

Underlying claim considerations


Over the past two years, Lebanon's spiralling economic downfall has been reported worldwide. The unexpected covid-19 lockdown measures only added to the turmoil faced by the crisis-hit country. In the midst of all this, Lebanon experienced one of the biggest non-nuclear blasts in history. On 4 August 2020, an explosion in Beirut Port tore across the capital city, killing over 200 people, injuring over 6000 and leaving an estimated 300,000 homeless. Naturally, important considerations of liability and compensation for losses sustained were raised in the aftermath of the blast. Questions, including the following, arose:

  • Who will compensate the victims?
  • Who will be held accountable for the repairs?

This article is a brief overview of the situation surrounding the incident, the regulatory (re)insurance framework in Lebanon and the various (re)insurance considerations relating to the recovery of losses sustained in relation to the blast.


The explosion was reportedly caused by 2,750 tonnes of ammonium nitrate that had been stored in a warehouse since 2013. The World Bank estimated that between $3.8 and $4.6 billion of material damage was caused. In addition, the UN Development Programme has estimated that the cost of cleaning up the environmental degradation from the explosion will be over $100 million. Although it is expected that the vast majority of losses will be insured by Lebanese insurers, and that international reinsurers will face significant exposure to claims, liability for the losses is still unclear.

Lebanese officials vowed that the cause of the explosion would be investigated vigorously and expeditiously. The government, before tending its resignation on 10 August 2020, referred the "Beirut Port Explosion" file to the Higher Judicial Council, an exceptional court with exclusive jurisdiction over crimes listed in article 356 of the Penal Procedure Law, which include crimes committed against public safety and security as well as crimes related to the breach of job duties and abuse of powers. However, in the 16 months since the blast, Human Rights Watch has pointed out the procedural and systemic flaws in the domestic official investigation which have rendered it incapable of credibly delivering justice. According to Human Rights Watch, these flaws include:

  • a lack of judicial independence;
  • immunity for high-level political officials;
  • a lack of respect for fair trial standards; and
  • due process violations.

The investigation is currently suspended pending the high court's decision regarding the legal challenge asking to replace the current leading investigator, Judge Tarek Bitar. He is the second judge to lead the investigation; the first one was removed following similar accusations levelled against him.

The official investigation into the cause of the explosion and the findings will be key to policy coverage. However, the stalled investigation leaves victims in compensation limbo as Lebanese insurance companies are refusing to compensate for damages, pending the investigation's results. According to Assaad Mirza, a board member of Lebanon's Association of Insurance Companies and the chief executive of Capital Insurance and Reinsurance, only approximately $100 million of an estimated $1.1 billion in insured losses has been paid out so far.

Eventually, depending on whether the investigation concludes that the explosion was accidental or not, insurance contracts will need to pay out. However, insurers are likely to pin the blame on those responsible for storing the chemicals that exploded. It remains to be seen whether the government will bear some of the responsibility and costs. For now, as the investigation is frozen, insurers, reinsurers and victims alike face an uncertain situation.

Ultimately, much of the loss is expected to be covered by global reinsurers. It is thus in the interest of the reinsurers to scrutinise the manner in which underlying claims will be assessed, adjusted and paid. In the present case, local insurers may come under pressure from the government to make payments to those affected as soon as possible, so as to enable the speedy repair and rebuilding of Beirut. Therefore, reinsurers may need to pay increased attention to the manner in which underlying claims arising from the explosion will be settled. Generally, the policy-issuing company and the reinsurer have two main considerations when faced with determining reinsurance coverage for a loss:

  • whether the underlying loss is a covered loss under the reinsured insurance policy; and
  • if the loss is a covered loss, whether the loss is also covered under the reinsurance contract.

Regulatory framework in Lebanon

The rules and regulations governing the (re)insurance sector in Lebanon have been established under the Decree 9812 of 1968. The decree needs to be read in light of:

  • the Code of Obligations and Contracts (COC);
  • the Code of Civil Procedure; and
  • the Code of Commerce.

The Insurance Control Commission (ICC) within the Ministry of Economy and Commerce is the regulatory body and the supervisory authority in Lebanon. Specifically, the ICC has powers to enforce the regulatory and supervisory frameworks through interventions and penalties. In relation to the explosion, the ICC has requested that insurance companies process and assess all of the claims related to the blast pursuant to the terms and conditions of the applicable policies and submit periodical reports on the progress of the claims (the most recent report was dated October 2021).

Underlying claim considerations

Claims stemming from an explosion are typically difficult to assess. In this case, the Beirut blast also came in the midst of:

  • the covid-19 pandemic;
  • the worst economic crisis in decades; and
  • social unrest.

These are all factors which further complicate the assessment of insured losses. To exacerbate the situation even further, the explosion has sparked anti-government protests in Beirut, and adjusters will now need to make the distinction between damage due to the explosion and damage related to the protests.

Although the level of insurance penetration is unclear, the market is expecting it will be high. The blast had hit an industrialised port area and considering that Beirut is a commercial hub, the incident is likely to trigger myriad claims. A few of the potential claim types are outlined below, in addition to the considerations that must be considered under Lebanese law.

Death and personal injury claims
The explosion killed at least 200 people and injured at least 6,000 individuals. While it is hoped that medical and life insurance claims are covered by government-supported schemes and individual medical and life insurance policies, liability insurers underwriting the warehouse owner's and the port authority's operations are also likely to expect claims.

Property claims
The explosion caused an estimated $10–15 billion in property damage. The blasts caused damage to:

  • cars;
  • property;
  • marine cargo;
  • containers;
  • warehouses;
  • port buildings;
  • commercial and residential real estate; and
  • road and rail infrastructure.

The significant damage caused to the Beirut Port silos severely affected the grain facility at the port, which stores 85% of Lebanon's cereals, and a nearby flour mill. According to the High Relief Commission in Lebanon, at least 8,000 buildings, including 50 ancient structures, were damaged. Given the extent of the damage in one of Lebanon's wealthiest areas, it is envisaged that the insurance sector will be hit hard. The effects of the blasts were felt several kilometres away from the port.

Supply chain disruption and business interruption claims
As a result of many of the port's facilities having been shut, companies and businesses will have experienced disruption to their supply chains. As such, business interruption extensions to property policies will be affected. Multinational companies operating from Beirut and other companies whose key suppliers or customers operate from the area are expected to place their business interruption covers in global markets. In light of the political and financial instability already present in Lebanon, this type of cover had already been brought into sharp focus. Considering that many (re)insurers have since narrowed their policy language in an effort to limit their exposure to known risks, disputes are expected to arise in the context of contingent business interruption claims as to whether the policy wording covers the losses or not.

The determination of whether (re)insurance companies will have to cover the damages resulting from this explosion will mainly depend on the terms and conditions of each insurance policy. Insurance policies usually do not cover losses arising from acts of war or terrorism. Such incidents are usually listed within the exclusion section of most insurance policies. However, should this explosion be qualified as an accident, for victims to obtain compensation from insurance companies, the relevant policies should specifically include coverage for this type of accident, which is classified as explosions and/or fires.

Time bar and condition precedents
Article 985 of the COC sets the time bar for filing claims at two years. Denial of coverage may be based either on provisions in the policy itself, such as conditions precedent, or on stipulations set by law.

However, even when provisions in the policy may appear to have been breached, article 983 of the COC provides that time bars may become void:

All general clauses inflicting forfeiture on the insured in the event of violation of laws and regulations, unless such violation is in effect a grievous and inexcusable fault . . . All clauses inflicting forfeiture on the insured by reason of mere delay in his declaration of contingency to the authorities or in the production of documents, without prejudice to the insurer's right to press for an indemnity proportionate to the damage that such delay has caused to him.

It is specified that:

The provision of sub-paragraph 1 of the present article does not prevent the stipulation of forfeiture by reason of infringement to laws or regulations which texts are totally reproduced in the policy.

In relation to the notifications, article 974 of the COC provides that the insured is required to "inform the insurer, in conformity with the provisions of article 977, of any new circumstances that may increase the risks involved" and "to notify the insurer, three days after he has been acquainted with any contingency likely to involve the insurer's liability of such contingency".

In general, as regards the issue of condition precedents to liability in insurance contracts, Lebanese courts will usually recognise and uphold the terms of the parties' agreement unless a particular provision contravenes with public policy. In this regard, if a provision is not clear and warrants interpretation, the judge will interpret it in favour of the debtor.(1)

When disputing the application of a given condition precedent, a party may argue that a particular condition precedent was not a fundamental or essential condition, or that the parties did not view it as such. Arguments can further be made in relation to the balance of prejudice caused if a specific condition precedent was to be strictly upheld. However, if the contract is clear cut regarding a particular condition precedent to liability, such arguments are unlikely to succeed. In this regard, article 983 of the COC is relevant, as well as the position of the court of appeal in relation to the "foreclosure of rights" clauses in insurance contracts, which the court considered has:

no reliance against an insured can be made on foreclosure clauses provided in the insurance policy unless these clauses had been written in special characters identifiable from the rest of the policy.(2)


The devastating explosion at the Beirut Port on 4 August 2020 caused much pain and suffering, including thousands of casualties and considerable material damage. Pending the release of the official report that specifies the cause of the blast and assigns responsibilities, insurers, reinsurers and victims alike face an uncertain situation.

Ultimately, the response of insurers and reinsurers will need to be consistent with the contract wording and commensurate with the premium charged for the reinsurance. Thus, compensation will ultimately depend on the qualification of the event by the investigators and whether it will consequently be covered by clear and unambiguous policy wording under the respective policies.

For further information on this topic please contact Alexandra Tompson or Zeina Obeid at Obeid & Partners by telephone (+961 1 36 37 90) or email ([email protected] or [email protected]). The Obeid & Partners website can be accessed at


(1) Atef El-Naquib, Theory of contracts and obligations, p 503; Court of Cassation, decision 45, 8 May 1995.

(2) Court of appeal, decision 306, 20 May 1965.