Marine liability insurance provider London P&I Club is advising shipowners and brokers to place more emphasis on war risks cover, rather than focusing primarily on price, as claims increasingly arise from events outside traditional high-risk areas.
Ben McKeith, senior underwriter at the London P&I Club, said many shipowners did not adequately integrate long-term war risk planning into their wider risk management strategies.
He noted that focus on coverage tends to increase during times of geopolitical tension, such as the recent escalation in the Middle East Gulf, but noted that such assessments should be more consistent.
“Until recently, shipowners had no good reason to consider war risk coverage, so prior to updates it was treated as an afterthought. Recent developments in the Middle East have once again highlighted why ongoing assessment of your war risk insurance needs is so important for shipowners and brokers,” commented McKeith.
The advice follows rising tensions with Iran and a series of war risk claims made over the past 12 months. Some of the claims relate to attacks on ships that occurred outside recognized high-risk areas but are nonetheless linked to the ongoing Russia-Ukraine conflict.
“We have already seen incidents of shell mines attached that subsequently exploded outside the Black Sea, particularly off the coast of Turkey, the Mediterranean, the northern coast of Libya and the west coast of Africa. For some this may mean that the claim is from a different insurance company than the insurance company that provided gap cover for the Black Sea voyage, so the scope of both policies must be carefully considered and aligned with each other to ensure there is no gap risk in the policy.”
McKeith stressed that while some shipowners operate outside recognized high-risk areas and may therefore opt for limited war risk insurance, the increased frequency of incidents in other areas points to the emergence of a wider threat. These developments underscore the importance of ensuring appropriate coverage.
“Some shipowners choose to take out limited war risk insurance because they know they are not trading in traditional high-risk areas. For example, in the Black Sea, some shipowners believe they can avoid designated high-risk areas to avoid an incident. However, your vessel can still be targeted by floating mines, drones and underwater divers, regardless of cargo or destination.
“We are seeing a similar story in the Middle East, where geopolitical challenges continue to restrict access to the Strait of Hormuz. Some shipowners know they will not enter high-risk areas such as the Black Sea or the Middle East Gulf, so they do not check their war risk insurance carefully. However, the emergence of new risks means we urge shipowners and brokers to take a closer look at their war risk insurance and ensure they have adequate cover. This is what marine insurance is all about. It is checking for the unexpected.”
He further noted that while current geopolitical conditions have prompted shipowners and brokers to review their risk exposures, a similar review should be conducted when policies expire, regardless of whether tensions persist in areas such as the Middle East or the Black Sea.
“Shipowners and brokers need to ask themselves today what is actually included in their war risk insurance. For many, the answer is simply that they have a standard policy as part of their annual premium.
“However, ongoing geopolitical issues in the Middle East Gulf mean we are unlikely to see war risk insurance premiums return to low levels any time soon. So while it may be some time before owners need to renew their cover, they need to start thinking today about how adequate their war risk insurance will need to be next year, particularly as ships face greater risks outside traditional high-risk areas.”