War risk returns: Reshaping of hull and cargo premiums
Telegraph | 13 April 2026
A ceasefire in the West Asia conflict has now been announced, bringing a temporary pause to hostilities and a sense of relief across global markets.
However, this is not a return to normalcy.
A ceasefire represents a pause in active conflict, not a resolution, and underlying risks continue to shape trade and insurance dynamics in the region.
Even if the current conflict de-escalates in due course, the region is likely to witness intermittent skirmishes over the next few years. For global trade, the implications are immediate and far-reaching.
Given that oil remains the most critical commodity exported from this region, any disruption to supply chains has a cascading effect on global inflation, impacting bothgoods and services. In recent weeks, media attention has focused sharply on the steep rise in marine war insurance premiums. However, beyond the headlines, it is equallyimportant to understand how market participants are behaving in response to these risks.
To assess the real impact on hull and cargo premiums, the situation can be viewed through four lenses: intent to buy, need to buy, availability of cover and affordability.
Intent to buy
Since 2022, parts of the West Asia have been classified as High-Risk Areas by the London insurance market. As a result, war risk premiums for hull and machinery had already increased to around 0.20–0.25%.
Around the same time, Indian insurers withdrew automatic war risk coverage for cargo transiting through the region, with provisions to reinstate it at an additional premium of approximately 0.025%. This was well before the outbreak of the current war. Despite the warning signals, a significant number of exporters and importers chose not to opt for additional war cover. In many cases, this was either due to a lack of awareness or a reluctance to incur additional costs in the absence of active conflict. In hindsight, the intent to buy adequate war risk protection was largely missing.
Need to buy
In the current environment, the need for war risk cover appears obvious.
However, in practice, it is more nuanced. The immediate need is most acute for those whose cargo is already exposed within the conflict zone.
For others, the perceived urgency is lower, as vessels are generally avoiding initiating fresh voyages into high-risk areas.
That said, there is still demand for war risk cover from exporters trading with relatively safer parts of the region, such as the western coast of Saudi Arabia or certain areas in Oman.
Even when these routes fall outside the most critical zones, the proximity to conflict increases risk perception and, consequently, insurance demand.
Availability of covers
Contrary to some perceptions, war risk insurance has not disappeared from the market.
According to a study by the Lloy’s Market Association, nearly 88% of war risk underwriters, including Lloyd’s syndicates and company markets, continue to offer coverage for the West Asia war zone.
However, availability does not imply affordability or uniform pricing.
Premiums vary significantly across underwriters and are subject to frequent revisions based on evolving risk assessments. In the current scenario, war risk premiums for hull and machinery have surged to as high as 7.5% of the vessel’s value, while cargo rates have risen to approximately 0.50% of cargo value.
This elevated pricing reflects not just active conflict risk but also the uncertainty around how durable the current ceasefire will be. Insurers continue to price in the possibility of renewed disruptions.
This marks a sharp escalation compared to pre-war levels and reflects both heightened risk and the dynamic nature of underwriting in conflict zones.
Affordability
The sharp increase in premiums has inevitably raised concerns around affordability.
However, in situations where exposure is unavoidable, war risk insurance becomes less of a discretionary expense and more of a necessity. For stakeholders with assets or cargo at risk, the decision is less about price sensitivity and more about risk mitigation.
The current environment underscores a critical lesson. Treating war risk cover asoptional can lead to significant financial exposure when conflict erupts unexpectedly.The reluctance to incur marginal additional premiums in relatively stable times oftenresults in substantially higher costs during crises.
The road ahead
Even after the eventual resolution of the current conflict, the region is unlikely to return to a low-risk environment immediately.
Sporadic tensions and localized disruptions may persist, keeping war risk considerations relevant for the foreseeable future. From an operational standpoint, the ceasefire has provided some immediate relief.
Assurances around safe passage through the Strait of Hormuz are expected to easecongestion, allowing vessels stranded in the Persian Gulf to exit in a phased manner. This is akin to the clearing of a traffic bottleneck, which may improve short-termmovement of goods without immediately softening insurance pricing. Over time, as stability improves, premium rates are expected to moderate.
However, the structural shift in risk perception is likely to endure. Exporters and importers operating in or around the West Asia would benefit from maintaining consistent war and strikes coverage, rather than adopting a reactive approach.
If the ceasefire evolves into a sustained cessation of hostilities, insurers may gradually reassess risk and pricing. Until then, caution will prevail, particularly for shipments routed through critical corridors such as the Strait of Hormuz, which remains central to global energy and trade flows.
The broader takeaway is clear. Wars and geopolitical disruptions are inherentlyunpredictable. In such an environment, proactive risk management through appropriate insurance cover is not just prudent but essential for the continuity of global trade.
Balasundaram R, Head of Marine Insurance at Policybazaar for Business