Mumbai: Reinsurers are reassessing war-risk exposure across marine hull and cargo, and aviation policies as West Asian tensions rise, particularly around the Strait of Hormuz, which carries about 20% of global oil flows and is now viewed as a high-risk combat zone.
There could be an immediate impact of 20-25% in war risk premium for certain zones after the advisory from the global reinsurers.
“The lead reinsurer usually sends out letters of termination or communicates any changes in the policy on behalf of all the reinsurance companies on the placement,” said Hitesh Joshi, ED and additional charge of CMD, General Insurance Corporation of India (GIC Re).
Some hull policies have already been cancelled or repriced sharply higher after guidance circulated from the large insurance market, while cargo wordings remain under review, a source said.
A joint committee of leading reinsurers met to assess marine cargo classifications, with clarity expected shortly. For now, several insurers have discontinued hull cover in affected zones, while cargo cancellations are still being evaluated.
Underwriters say the waterway is increasingly being treated as a high-risk combat zone amid threats by Iran to disrupt shipping. War-risk premiums for vessels transiting the Persian Gulf and Red Sea have surged, with insurers imposing “additional premiums” (AP) that can run into hundreds of thousands of dollars per voyage, depending on vessel size and cargo value.
“Premiums are also likely to be revised due to disruption in the Strait of Hormuz, especially if cargo is forced to take a longer route,” he said.
During the earlier Israel-Gaza conflict, reinsurers withdrew treaties in designated high-risk areas.
Active Monitoring to Crisis Management
Standard war-risk clauses allow insurers to rapidly cancel geographic cover if hostilities escalate. State-owned reinsurer GIC Re has amended its Marine Hull War Risk scheme, withdrawing cover in several high-risk global regions from early March.
Market experts say insurers are likely to issue formal cancellation notices under seven-day or short-notice clauses standard in marine and aviation war policies if hostilities intensify.
Shipping lines are already rerouting via the Cape of Good Hope, adding 15–20 days to voyages, increasing fuel costs and potentially triggering ‘delay in startup’ claims and higher hull and cargo premiums. Under standard war-risk frameworks, geographic cover can be withdrawn at short notice, effectively halting insured shipments unless alternative arrangements are secured.
Trade credit insurers are likely to withdraw “limit” approvals for companies trading in the region, fearing a wave of defaults caused by the sudden cessation of business operations. Insurers believe that the next move for the majority of insurers would be shifting from active monitoring to crisis management, which involves issuing seven-day cancellation notices on existing war-risk policies to reset rates and invoking “territorial exclusions” for any new business in the Middle East.
Freight rates are set to rise again, with the extent of the increase depending on how long and how severely the disruption persists, according to Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations. During the Red Sea crisis, rates had surged by 300-400%. In addition to higher freight costs, marine insurance premiums are also expected to harden, with the additional burden likely to be passed on to customers. During the previous crisis, insurance rates had surged sharply. “Insurance, in some cases, for the small value was up by around 500%,” Sahai said, adding, “For us also, it was around 200%.”
There could be an immediate impact of 20-25% in war risk premium for certain zones after the advisory from the global reinsurers.
“The lead reinsurer usually sends out letters of termination or communicates any changes in the policy on behalf of all the reinsurance companies on the placement,” said Hitesh Joshi, ED and additional charge of CMD, General Insurance Corporation of India (GIC Re).
Some hull policies have already been cancelled or repriced sharply higher after guidance circulated from the large insurance market, while cargo wordings remain under review, a source said.
A joint committee of leading reinsurers met to assess marine cargo classifications, with clarity expected shortly. For now, several insurers have discontinued hull cover in affected zones, while cargo cancellations are still being evaluated.
Underwriters say the waterway is increasingly being treated as a high-risk combat zone amid threats by Iran to disrupt shipping. War-risk premiums for vessels transiting the Persian Gulf and Red Sea have surged, with insurers imposing “additional premiums” (AP) that can run into hundreds of thousands of dollars per voyage, depending on vessel size and cargo value.
“Premiums are also likely to be revised due to disruption in the Strait of Hormuz, especially if cargo is forced to take a longer route,” he said.
During the earlier Israel-Gaza conflict, reinsurers withdrew treaties in designated high-risk areas.
Active Monitoring to Crisis Management
Standard war-risk clauses allow insurers to rapidly cancel geographic cover if hostilities escalate. State-owned reinsurer GIC Re has amended its Marine Hull War Risk scheme, withdrawing cover in several high-risk global regions from early March.
Market experts say insurers are likely to issue formal cancellation notices under seven-day or short-notice clauses standard in marine and aviation war policies if hostilities intensify.
Shipping lines are already rerouting via the Cape of Good Hope, adding 15–20 days to voyages, increasing fuel costs and potentially triggering ‘delay in startup’ claims and higher hull and cargo premiums. Under standard war-risk frameworks, geographic cover can be withdrawn at short notice, effectively halting insured shipments unless alternative arrangements are secured.
Trade credit insurers are likely to withdraw “limit” approvals for companies trading in the region, fearing a wave of defaults caused by the sudden cessation of business operations. Insurers believe that the next move for the majority of insurers would be shifting from active monitoring to crisis management, which involves issuing seven-day cancellation notices on existing war-risk policies to reset rates and invoking “territorial exclusions” for any new business in the Middle East.
Freight rates are set to rise again, with the extent of the increase depending on how long and how severely the disruption persists, according to Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations. During the Red Sea crisis, rates had surged by 300-400%. In addition to higher freight costs, marine insurance premiums are also expected to harden, with the additional burden likely to be passed on to customers. During the previous crisis, insurance rates had surged sharply. “Insurance, in some cases, for the small value was up by around 500%,” Sahai said, adding, “For us also, it was around 200%.”
