Wartime Risk Insurers Driving Global Trade

• Increased risks in shipping routes due to conflicts in the Middle East and Ukraine have fueled demand for war risk insurance.
• London-based specialist insurers are providing coverage for shipping in high-risk areas like the Red Sea and Black Sea.
• War-risk premiums have surged, generating approximately $1 billion annually, as trade navigates geopolitical tensions.

Importance of War Risk Insurance

Amid rising geopolitical tensions, war risk insurance has become a critical enabler of global maritime trade. Essential commodities like oil, coal, and grains traverse perilous waters, including the Red Sea and Black Sea. Without specialized insurance, many shipments would face significant delays or cancellation.

Expansion of Specialist Providers

London, a historic hub for marine insurance, has seen rapid growth in war risk coverage. Several new managing general agents (MGAs) have entered the market, offering tailored policies for vessels navigating hazardous waters. These providers insure ships and cargoes against threats like drones, missiles, and mines. MGAs, including new entrants, have captured a significant share of the market by taking on high-risk policies that traditional insurers avoid.

Growing Demand for High-Risk Coverage

Increased incidents of maritime attacks have amplified the need for insurance:

• Over 100 maritime attacks since 2023 in the Red Sea region.
• Vessel losses, including a tanker burned for four weeks and another sunk by a drone, highlight the stakes involved.

Financial Impact and Premium Growth

War risk insurance premiums have ballooned over the past three years, with London contributing an estimated £500 million ($621 million) annually. Global premiums may total nearly $1 billion. Policies are vital for shipowners navigating war zones, offering protection against uninsured losses. High-risk areas include the Gulf of Guinea, the Persian Gulf, and sections of Russian coastline.

The Role of Underwriters

Insurers assess war risk using casualty data from conflict zones to determine premiums. Despite high payouts in recent incidents, insurers play a crucial role in facilitating maritime trade. Without war risk insurance, vital goods would struggle to move across global markets.

Industry Outlook

As geopolitical tensions persist, the demand for war risk insurance is likely to grow. London’s war insurance market continues to adapt, ensuring that maritime trade remains resilient amid global uncertainties.