Insurers need to be reasonably certain their losses will not exceed specific limits; this is why policies exclude coverage for loss caused by war or nuclear events.

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This question hinges on the idea that insurance works best when total losses stay within the insurer’s financial capacity. Excluding perils like war or nuclear events keeps the risk from becoming catastrophic—large, widespread losses that could overwhelm reserves and reinsurance. By removing these extreme risks, insurers aim for losses that are predictable and manageable across the policy pool.

While some losses can be statistically predictable or definite and measurable, the defining reason for exclusions is to avoid catastrophic exposure. War and nuclear events aren’t just random chances; they can trigger vast, systemic claims across many policies at once, which could threaten the insurer’s solvency.