Rising geopolitical tensions and the growing importance of marine war risk covers

It no longer takes a full scale war to disrupt global trade. A missile strike near a busy shipping lane, a drone spotted at sea or even talk of escalation can send shockwaves across markets. In recent years, maritime trade has repeatedly been exposed to geopolitical tensions. The Strait of Hormuz, the Red Sea, and Eastern Europe are just a few examples. In this environment, marine war risk insurance is no longer a niche add on. It has become a core part of managing risk.

Shipping has always carried uncertainty. What has changed is the nature of that uncertainty. Traditional risks like storms or mechanical failure are no longer the main concern. Today, disruptions are often man made. Sanctions, naval standoffs, piracy in new areas, and targeted attacks on vessels are becoming more common. This shift is changing how shipowners, cargo owners, and insurers think about protection.

The Strait of Hormuz is a clear example. Nearly a fifth of the world’s oil passes through it. For India, the route is critical as it depends heavily on crude imports from the Middle East. Even a small rise in tensions can create immediate concern. It affects both energy security and shipping operations. At times like these, war risk premiums can rise sharply.

War risk cover is very different from standard marine insurance. It is designed for extreme situations such as war, terrorism, mines, seizures, or politically driven violence. These are risks that are hard to predict and even harder to measure. Due to this, insurers tend to be cautious. Premiums can rise quickly and usually stay high until there is clear and lasting stability.

For Indian businesses, the impact is wide ranging. Importers of crude oil, LNG, fertilisers, and even edible oils feel it directly. Over 95% of India’s trade by volume and 70% by value travels via sea lanes. Higher premiums push up freight costs. These costs often reach the end consumer. In some cases, charterers ask for extra protection or special clauses. This adds another layer of complexity. Many companies now see insurance as a key factor in their overall cost structure.

The Red Sea situation over the past year has made this very clear. Some vessels have avoided the region entirely, choosing longer routes around the Cape of Good Hope. This adds time and fuel costs. Others continue through but under tighter controls and higher insurance charges. For Indian exporters, especially in sectors like engineering goods, textiles, and pharmaceuticals, this creates real pressure. Deliveries can be delayed, contracts may be renegotiated, and margins often shrink.

One of the biggest challenges with war risk insurance is how quickly pricing can change. Unlike annual policies, these premiums are often set per voyage or for short periods. They can shift overnight. Underwriters rely on real time inputs such as security alerts, naval updates, and political developments. Confidence builds slowly, but it can drop very quickly.

In India, there is a growing focus on managing these risks more actively. Sudden premium spikes and coverage cancellations by global underwriters directly threaten the country’s energy security and export competitiveness. Larger companies are working closely with brokers to plan routes, consider alternatives, and review how their insurance is structured. Some are exploring captive models or layered programmes to handle volatility. Public sector companies, especially in energy, have taken a more proactive approach due to the scale of their operations.Indian insurers and reinsurers are also adapting. While global markets still provide much of the war risk capacity, local expertise is slowly improving. There is more emphasis on understanding risks in an Indian context. This includes better assessment, closer coordination with global reinsurers, and quicker support for clients.

There is also a human side to this. Seafarers working in high risk areas face real stress. Safety concerns, uncertainty, and long periods at sea can take a toll. War risk cover extends to crew protection as well. It ensures compensation and support in extreme situations. This matters, especially since Indian seafarers form a significant part of the global maritime workforce.

Looking ahead, the need for marine war risk insurance is only likely to grow. Trade routes may shift and supply chains may adjust, but uncertainty will remain. For businesses, being prepared is more important than reacting late. Understanding risks, planning, and working closely with insurers can make a real difference.
The Government of India launched the Bharat Maritime Insurance Pool (BMIP). The pool is backed by a massive INR 12,980 crore (approx. USD 1.5billion) sovereign guarantee to absorb catastrophic claims. This provides seamless domestic underwriting across marine hull, machinery, cargo and specialised war risks. BMIP guarantees that India-linked vessels can maintain freight operations in high-risk corridors. What was once a routine checkbox is now a strategic decision. Marine war risk insurance sits at the heart of global trade today.
Author :

Rajesh Singh – Executive President and Head of Property & Risk Management, Howden India