Stemming the Tide of War Insurance Costs

 

War risk insurance costs have soared by up to 60% thanks to recent escalated 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.

For instance, 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. And, although a recent ceasefire between Israel and Iran eased rates slightly, dropping back to the high 0.35–0.45% range, the volatility persists.

Saleem Khan, Chief Data & Analytics Officer, Pole Star Global provides his view on the strategies that charterers, brokers and shippers should consider as they strive to reduce the impact of war insurance costs on their respective organizations.

Prioritize Reputable and Transparent Counterparties

One critical strategy is to work 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

The digitization and digitalization of various processes and systems across the maritime sector is increasingly prevalent and powerful. This is providing the sector with valuable data and insights upon which to make better decisions for charterers, brokers, shippers and crew.  For example, by using sophisticated and proven maritime intelligence platforms it is possible for the sector to attain detailed ownership and beneficial owner intelligence. This kind of 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 about these developments and changes – including vessel tracking, GNSS jamming alerts, and regional risk analytics – can help avoid costly detours while vessels travel 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. Therefore, it’s worth exploring these options.

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 that combine war risk with cybersecurity cover. This ensures comprehensive protection against evolving maritime threats.

Conclusion

War risk premiums are climbing. They are staying elevated due to both physical route hazards and the shadow of sanctions, watchlists, and intermediary integrity. Charterers and brokers can stem the tide and control their exposure, not just by re-routing their vessels and shipments; but by enhancing transparency, deploying forensic ownership data, and actively managing voyages with intelligence-backed insights and smart underwriting strategies.

Saleem Khan is Chief Data & Analytics Officer at Pole Star Global.