West Asia war: Marine war-risk insurance tightens as reinsurers adopt no-market stance

Mumbai: Reinsurers are expected to maintain a no-market stance on marine war-risk cover as executives warn the phase may not be temporary after US-Iran peace talks failed. With limited visibility on how risks will evolve, reinsurers are unlikely to price or offer capacity mid-cycle.

Reinsurers, largely based in hubs such as London, typically withdraw cover for vessels operating in high-risk zones through geographic exclusions defined by latitude and longitude. Ships transiting these areas are effectively left without war-risk protection, making it commercially unviable for owners to sail without cover.

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"Reinsurers, which are largely sitting in London, will continue to withdraw war-risk cover for ships within specific geographies, in the absence of a ceasefire," said a reinsurance executive. "So, vessels in those zones are left uninsured for war risk. While standard marine cover remains available, it is specifically the war-risk segment that is seeing capacity dry up."

The disruption is limited to war-risk within marine insurance. Standard marine cargo cover remains available at relatively soft rates, with no capacity constraints on routine trade routes.

To address the gap, the government is working on a sovereign-backed insurance mechanism for the domestic market as tensions in West Asia disrupt global shipping flows. The proposed structure mirrors earlier industry pools, such as terrorism and nuclear risk frameworks created during similar conditions. The plan involves setting up an industry-wide marine pool with an initial capacity of about $100 million, led by domestic insurers including GIC Re and New India Assurance. This pool will act as the first layer of risk absorption for conflict-related losses.

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Beyond this, a sovereign guarantee of about $1.5 billion is expected to serve as a backstop, providing additional comfort to insurers underwriting voyages through high-risk regions such as the Persian Gulf.