War-Risk Premiums Surge
Written by Erin Bradbury - 11 May 2026
The conflict in the Middle East has undeniably had far reaching implications. From a global commerce perspective, there has been palpable concern over the disruption of supply chains. To provide some context, the Strait of Hormuz is one of the busiest oil shipping channels in the world with around 20% of global oil passing through it. In monetary terms, this equates to roughly £447 billion in trade annually with an estimated 20 million barrels moving through the strait each day in 2025.
In turn, this has raised an issue that might not immediately come to mind: the impact on insurance premiums and policy interpretations, and what this means for companies. Those operating in the strait, as well as other high risk trade routes, will know that standard marine insurance policies exclude war-related coverage. Effectively, companies must obtain separate war-risk insurance to protect vessels, cargo and operations.
Prior to the conflict breaking out, war insurance premiums were at 0.25% of a vessels value, increasing to 1 – 1.5% the week prior and now increasing to a high of between 3.7 – 7.5% (even aviation war risk premiums have skyrocketed from 50% to 500%.) With understandably limited movement, the US government has announced its intention to create a reinsurance fund – valued at $20 billion – to maintain trade movement in that region, and help alleviate increasing oil prices. This has been in response to insurers stepping away from underwriting marine trade activity in the Gulf.
As a result of the conflict many policies have quickly been renegotiated or cancelled, with clauses such as 48-hour cancellation notices being invoked. Even with wariness from underwriters recent updates suggest that an 88% appetite amongst insurers continues to prevail with one of the oldest insurers, Lloyd’s of London, still providing war coverage.
Coverage disputes may still arise as policyholders look to recover losses. Where vessels are unable to leave the affected location, due to hostilities, questions may emerge around whether the insured remain ‘in the grip of peril’. This concept addresses whether a loss continues to be attributed in those circumstances, excluding the expiry of a cancelled notice.
Just last year, a judgement passed concerning the detention of aircraft following Russia’s invasion of Ukraine, stating: “if an insured is, within the policy period, deprived of possession of the relevant property by the operation of a peril insured against and, in circumstances which the insured cannot reasonably prevent, that deprivation of possession develops after the end of the policy period into a permanent deprivation by way of a sequence of events following in the ordinary course from the peril insured against which has operated during the policy period, then the insured is entitled to an indemnity under the policy.”
As such, there is potentially scope for this argument to be applied if a vessel is unable to leave the affected location due to those circumstances, as well as aviation policyholders, although the precise circumstances matter in order for that claim to be successful.
Insurance is undoubtedly a complex subject, where language is critical. Policyholders and lawyers will certainly be pouring over the clauses in agreed policies to understand any potential claims and their values, as well as understanding their options for renewals.
Read more about the realities of practicing as an insurance lawyer here (Insurance - Chambers Student Guide.)