Shipowners and brokers are being urged to look beyond price and scrutinise the scope of their war risk cover as claims arising from incidents outside traditional high-risk areas increase, a senior underwriter at
the London P&I Club has warned.
Ben McKeith (pictured), senior underwriter at the London P&I Club, said too few owners are building long-term war risk planning into their wider risk management strategy. He noted that owners tend to focus on cover only when geopolitical tensions flare, most recently following the escalation of conflict in the Middle East Gulf, and argued that war risk insurance needs to be treated as a live issue rather than a once-a-year renewal item.
“Until recently, owners have not had good reason to consider the scope of their war cover and therefore it is treated as an afterthought until it is time to renew. The recent developments in the Middle East have once again put a spotlight on why continuously assessing your war risk cover needs is so important for owners and brokers,” McKeith noted.
His warning comes after not only the escalation of tension involving Iran but at least half a dozen war risk claims that have been filed in the last 12 months following attacks on vessels outside of traditional high-risk areas, despite being linked to the ongoing Russia-Ukraine conflict.
McKeith pointed to a pattern of incidents occurring far from the charted war and breach areas that often drive buying decisions.
“We have seen incidents of limpet mines being attached to vessels that then explode outside of the Black Sea, most notably off the coast of Turkey, in the Mediterranean, off the coast of North Libya and off the west coast of Africa. For some, that might mean there is a different insurer for the claim to the one that provided breach cover for the voyage within the Black Sea so it is essential that the scope of both covers are considered closely and that they dovetail to ensure that there is no risk of gaps in cover," he said.
The conflict in Ukraine has highlighted how naval drones, drifting mines and missile strikes can affect merchant shipping well beyond declared exclusion zones, with insurance costs and routing decisions shifting as attacks occur. In parallel, attacks and ship seizures linked to Iran and its proxies in and around the Gulf have kept war risk firmly on the agenda for operators trading in and near the Strait of Hormuz.
McKeith said many shipowners are aware they are not trading in areas that typically require additional breach war risk cover, but the growing number of losses outside defined high-risk zones underlines the need to ensure that their base war policies are fit for purpose.
“We are seeing a similar story play out in the Middle East as geopolitical challenges continue to limit access to the Strait of Hormuz. Some shipowners know they aren’t entering a high-risk area like the Black Sea or Middle East Gulf so they don’t scrutinise their war risk cover," he noted. “However, the emergence of new risks means that we are urging owners and brokers to take a closer look at their war risk cover and ensure they have adequate cover in place."
Market practitioners have noted that war risk pricing has become increasingly event-driven, with additional premiums, deductibles and terms adjusted voyage by voyage as the threat landscape shifts. That places a premium on understanding how core war policies, breach cover and any specialist extensions interact across different regions and scenarios, rather than focusing solely on headline rates.
McKeith added that, while owners and brokers are right to be asking questions about their exposure and war risk cover today, those same questions need to be front of mind at renewal, which may fall months after the current flashpoints have faded from the headlines.
"Shipowners and brokers need to ask themselves today what they actually have in their war risk cover. For many, the answer is just a standard policy that they tick off as part of their annual insurance premiums," he said. "However, the ongoing geopolitical issues in the Middle East Gulf means that it is unlikely that we will see a return to low premiums for war risk cover any time soon. So while it might still be a while off until owners need to renew that cover, they need to start considering today how adequate their war risk cover needs to be for next year, particularly as vessels face greater exposure outside of traditional high-risk areas.”
In a market where a single regional flare-up can rapidly alter both trading patterns and war risk costs, the London P&I Club’s warning framed war cover less as a commodity purchase and more as a central component of fleet risk management.
