War risk insurance costs have soared by up to 60% amid last month’s escalating Middle East tensions. Is this increase surprising? No. Is it substantial? Yes. The increase reflects heightened volatility in regions like the Red Sea and Persian Gulf, particularly around the Strait of Hormuz.
Premiums in the Strait area rose from approximately 0.125% to 0.2–0.4% of a ship’s hull and machinery (H&M) value, translating to hefty increases. Meanwhile, vessels servicing the broader Middle East Gulf have seen premiums climb from 0.2–0.3% up to 0.5%, adding extra daily costs for VLCCs.
Although a recent ceasefire between Israel and Iran has eased rates slightly, dropping back to the high 0.35–0.45% range, the volatility persists.
Mitigating War Risk Insurance Cost Volatility: Strategies for Charterers, Brokers, and Shippers
Prioritise Reputable and Transparent Counterparties
One critical strategy is working exclusively with known, transparent entities. In a climate where war risk premiums are heavily influenced by perceptions of geopolitical exposure, not just by voyage routes, partnering with opaque or sanctions-linked firms can cause underwriters to hike premiums or withdraw cover altogether. Misaligned ownership can implicate unwitting funding to watch‑listed actors.
Leverage Beneficial Owner Data Tools
Tools like Pole Star Global’s PurpleTRAC offer detailed ownership and beneficial owner intelligence. This visibility enables charterers and brokers to verify their vessel source chain, avoid inadvertent support of illicit actors, and gain underwriters’ confidence—potentially securing lower premiums.
Embrace Dynamic Route Management & Risk Intelligence
War risk ratings now shift weekly, even daily in response to geopolitical changes. Leveraging real‑time intelligence, including vessel tracking, GNSS jamming alerts, and regional risk analytics—can help avoid costly detours and further insurance upcharges.
Opt for Bundled Premiums & Fleet Discounts
Underwriters sometimes offer fleet-based packages or longer‑period bundling, reducing the per‑voyage cost even in volatile zones. Such arrangements can soften steep premium hikes, especially for operators with multiple vessels.
Integrate Cyber & War Risk Coverage
The modern maritime threat landscape, marked by AIS spoofing, GNSS jamming, and cyber‑based vessel interference, demands integrated insurance policies combining war risk with cybersecurity cover. This ensures comprehensive protection against evolving maritime threats.
Stemming the Tide
War risk premiums are climbing, and staying elevated due to both physical route hazards and the shadow of sanctions, watchlists, and intermediary integrity. Charterers and brokers can control exposure not just by re-routing, but by enhancing transparency, deploying forensic ownership data, and actively managing voyages with intelligence-backed insights and smart underwriting strategies.