Since 2022 alone, 100+ merchant vessels have been attacked during those conflicts. Maybe it’s time to look closer at one of the most overlooked parts of marine insurance: War Risk Clauses.
Read the full introduction to our series of articles on the Middle East conflict .
War Risks Are Theoretical
When the sabres start rattling, merchant vessels often end up caught in between. Shipowners and cargo owners – who have little to do with the reasons behind the conflict – often end up paying the price.
- MV Yasa Jupiter – a bulk carrier was hit by a missile off Odesa after the Russian invasion of Ukraine.
- MV Rubymar – a cargo vessel struck by anti-ship missiles during the Red Sea crisis in February 2024.
- MKD VYOM tanker – damaged by a drone attack in the Strait of Hormuz during Iran-U.S. tensions.
Since 2022 alone, 100+ merchant vessels have been attacked during those conflicts. Maybe it’s time to look closer at one of the most overlooked parts of marine insurance: War Risk Clauses.
Myth: Standard Marine insurance already covers war
Reality: Under Institute Cargo Clauses and standard Hull & Machinery or P&I policies, war, civil war, rebellion, insurrection and hostile acts are typically excluded. War risk protection normally requires a separate war clause or a standalone war risk policy. Even broad “all risks” wordings such as Institute Cargo Clauses (A) still exclude war unless the Institute War Clauses are added.
Situation example: A container of electronics is damaged when a missile strike hits a port terminal. The cargo owner assumed their “all risks” cargo policy covered everything, but war perils were excluded because no war extension had been added. One event in the past week or so that may not have hit the headlines as much as the Gulf is the liquidation proceedings by FINMA against MBaer Merchant Bank in Zurich. This was because of allegations of lax money laundering controls and further that they were actively helping clients from (particularly) Russia, Iran and Venezuela to circumvent sanctions. As a result, the US Treasury initiated proceedings to exclude the bank from the US financial system (the USD economy) which is one of the most extreme sanctions available to them on a foreign bank.
Myth: A declaration of war is needed for the war exclusion to apply
Reality: Marine insurance does not rely on political declarations. War exclusions typically apply to hostile acts by or against a belligerent power, regardless of whether a war has been officially declared. Underwriters focus on the nature of the event, not the diplomatic wording.
Situation example: A vessel is struck by a military drone in a conflict zone where no formal war has been declared. The loss still falls under war risks because the damage resulted from a hostile military act.
Myth: Carrier liability or P&I insurance will cover war damage to cargo
Reality: Carrier liability regimes and P&I or H&M policies generally exclude war-like risks. In addition, conventions such as Hague-Visby often protect carriers from liability for war-related losses. Without dedicated war insurance, both cargo owners and vessel interests may face major uninsured exposures.
Situation example: A vessel carrying machinery sails through a conflict region and is damaged by a naval attack. The cargo owner files a claim against the carrier, but the carrier invokes war exceptions under the contract of carriage.
Myth: War risk cargo cover applies during all the journey
Reality: Typical cargo war clauses respond mainly while the cargo is on board a sea vessel or aircraft and for a limited time around that stage. War events occurring during inland transport usually require separate insurance. This creates a coverage gap that many shippers overlook.
Situation example: After discharge from the vessel, cargo is transported by truck through a region affected by armed conflict and is destroyed during a military attack. The marine war policy does not respond because the goods were no longer on board the vessel. Is our system prepared for the influx of capital which on the face of it seems legitimate, but when we dig down it is the property of sanctioned individuals, corrupt officials, criminals and worse? Are our banks more morally upright than MBaer? History suggests this may not be the case.
Myth: War cover Cannot be cancelled during a conflict
Reality: Marine war clauses usually contain short notice cancellation provisions, often seven days. Insurers may cancel, restrict, or re-rate cover if hostilities escalate or if certain regions become too dangerous. War risk pricing and availability can therefore change very quickly.
Situation example: A shipowner plans voyages through a newly designated war risk area. Shortly before departure, insurers issue a cancellation notice and require significantly higher premiums to reinstate cover.
Myth: CIF sales automatically give the buyer strong war cover
Reality: Incoterms only require the seller to arrange insurance but do not specify the scope of coverage. Many CIF shipments are insured under minimal Institute Cargo Clauses (C), which may not include war unless it is specifically added. Buyers often assume broader protection than actually exists.
Situation example: A buyer imports goods under CIF terms believing they are fully insured. When conflict disrupts the voyage and the cargo is lost due to a hostile act, the insurance arranged by the seller does not include war cover.
Myth: War insurancecovers everything,including delay
Reality: War policies are primarily designed tocover physical loss or damage to the vessel orcargo and related costs such as generalaverage or salvage. Consequential losses suchas delay, loss of market, or loss of use are normally excluded. This means financial losses from disruption may remain uninsured.
Situation example: Cargo arrives weeks late after a vessel is diverted due to military attacks in a shipping lane. The goods are intact, but the buyer loses a major contract because of the delay, and the war policy does not cover that financial loss.
Gediminas Dauksa
Group Practice Leader Transportation & Logistics
T +370 616 08451
