The London P&I Club, a provider of marine liability insurance, has advised shipowners and brokers to place greater emphasis on the scope of their war risk cover, rather than focusing primarily on price, as claims increasingly arise from incidents outside traditional high-risk zones.
According to Ben McKeith, Senior Underwriter at the London P&I Club, many shipowners are not adequately incorporating long-term war risk planning into their broader risk management strategies.
He observed that attention to the scope of cover tends to increase during periods of geopolitical tension, such as the recent escalation in the Middle East Gulf, but noted that such assessments should be conducted more consistently.
“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 commented.
This advisory follows heightened tensions involving Iran and a series of war risk claims filed over the past 12 months. Several of these claims relate to attacks on vessels occurring outside recognised high-risk areas, though still linked to the ongoing Russia-Ukraine conflict.
“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.”
McKeith highlighted that while some shipowners operate outside recognised high-risk regions and may therefore opt for limited war risk cover, the increasing frequency of incidents in other areas demonstrates the emergence of broader threats. These developments underscore the importance of ensuring that adequate cover is in place.
“Some owners are choosing to have limited war risk cover because they know they’re not trading in traditional high-risk areas. For example, in the Black Sea, some are thinking that they can skirt defined high-risk areas to avoid incident. However, floating mines, drones and underwater divers could still target your vessel regardless of cargo or destination.
“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. 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. That is the whole point of marine insurance. It is a check against the unexpected.”
He further noted that while current geopolitical conditions are prompting shipowners and brokers to review their exposure, similar scrutiny should be applied when policies are due for renewal, regardless of whether tensions persist in regions such as the Middle East or the Black Sea.
“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.
“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.”
