War risk insurance in shipping: the chokepoint written in London

War risk insurance in shipping is the cover that pays when a ship is damaged, seized or sunk by an act of war, and it is the least visible chokepoint in world trade. No ship owner sails into a conflict zone without it, banks and charterers require it, and its price is set in the London market. Before the war with Iran, cover for a tanker crossing the Strait of Hormuz cost 0.2% to 0.25% of the hull's value per transit, per Lloyd's List. By July 2026 quotes had reached 7.5% to 10%. For a $120 million VLCC, that is the difference between about $300,000 and $12 million for a single passage.

How much insurance closed Hormuz is disputed. The Joint War Committee added the whole Persian Gulf and Gulf of Oman to its listed areas on 3 March 2026, and all 12 International Group P&I clubs, which cover about 90% of the world's ocean-going tonnage, gave notice cancelling parts of their war cover in the region, per S&P Global. The Lloyd's Market Association argues the opposite: in its survey of the war market a week after hostilities began, 88% of respondents still had appetite to write hull war risks, and it said safety concerns, not insurance availability, drove the fall in traffic. Both are true in part: cover remained available, but at a price and on terms that made most voyages uneconomic.

Key numbers

What this chokepoint controls

War risk insurance is not one policy but several layers. Hull war covers the ship itself against war perils, which standard hull policies exclude. War P&I covers the owner's liabilities to crew, cargo and third parties arising from war. Cargo war covers the goods, and loss of hire covers earnings while a ship is detained or damaged. Most hull war cover is written annually in the Lloyd's and London company market, with a clause allowing underwriters to cancel on seven days' notice (48 hours in many US wordings).

The mechanism that turns a conflict into a cost is the listed area. The Joint War Committee, which represents Lloyd's and London company underwriters, publishes a list of waters it considers high risk. It does not set prices. When a ship enters a listed area, its annual cover no longer applies automatically: the owner must notify underwriters and pay an additional premium, quoted per transit as a percentage of hull value and negotiated ship by ship. Those quotes are what shipping lines, charterers and eventually commodity buyers pay.

Who depends on it

Every party in a voyage. Ship owners cannot trade without war cover because financing banks require it. Charterers and cargo owners need it written into charter parties and letters of credit. Ports need P&I cover in place before a ship can call. When premiums rise, the cost moves down the chain into freight rates and delivered commodity prices, which is why insurance often reprices a chokepoint before the physical flow stops.

The dependency is concentrated in London. The Lloyd's market, the London company market and the 12 mutual P&I clubs of the International Group, most of them managed from London or Scandinavia, write most of the world's marine war cover and reinsurance. Governments have occasionally stepped in where the market would not, as the Ukrainian grain corridor insurance facility did in the Black Sea from 2023.

Alternatives and workarounds

Rerouting. The most common response: avoiding a listed area removes the need for additional premium. This is why premiums at Bab el-Mandeb pushed container lines onto the Cape of Good Hope.

State-backed cover. Governments or state reinsurers can underwrite what the market will not, at a political cost. Owners linked to states outside Western sanctions regimes also use national insurers, as Russian and Iranian tonnage does.

Selective trading. Underwriters now price by ship affiliation, not just by water. In the southern Red Sea in July 2026 the market quoted separately for general tonnage, Saudi-linked tonnage and northern Saudi ports.

Naval escort. Escorts lower the risk that underwriters price, but they rarely bring premiums back to pre-crisis levels on their own.

Historical incidents

Assets and companies exposed

Underwriters and reinsurers. Lloyd's syndicates, London company market insurers and the reinsurers behind them take the claims and set the terms. The Lloyd's Market Association and the International Underwriting Association run the Joint War Committee.

P&I clubs. The 12 International Group clubs, including Gard, Skuld, NorthStandard and Steamship Mutual, which cover liabilities and pool large claims.

Brokers. Marsh, Aon, WTW and specialist marine brokers place the cover and publish the indicative rates the market watches.

Owners and charterers. Tanker, LNG and container operators pay the additional premium or pass it on; owners linked to specific states face the highest rates. This entry is descriptive: the encyclopedia does not publish recommendations.

What to watch

• Joint War Committee circulars adding or removing listed areas.
• Indicative premiums published by Lloyd's List and brokers such as Marsh: the level for Hormuz and the southern Red Sea, and the spread between general and state-linked tonnage.
• P&I club notices of cancellation or reinstatement.
• State-backed facilities for Gulf or Red Sea trade, which would lower the effective cost of transit.

FAQ

What is war risk insurance in shipping? Cover that pays for loss or damage to a ship, its cargo or its liabilities caused by war, terrorism, seizure or mines, which standard marine policies exclude. It is written mostly in the Lloyd's and London markets and is required by lenders and charterers.

How much is the war risk premium for Hormuz? About 0.2% to 0.25% of hull value per transit before the 2026 war, rising to 7.5% to 10% by July 2026, per Lloyd's List. For a $120 million tanker, that is roughly $300,000 before and $9 million to $12 million after.

What are Joint War Committee listed areas? Waters that the committee of Lloyd's and London company underwriters considers high risk. Entering them suspends automatic cover and requires an additional premium for each transit. The committee lists areas but does not set premiums.

Did insurance close the Strait of Hormuz? Partly. Listing the Gulf and cancelling some war covers raised the cost of transit sharply in March 2026, but the Lloyd's Market Association says cover remained available and that physical danger, not insurance, drove ships away. In practice both worked together: cover existed at prices few owners would pay for voyages they considered unsafe.