Posted on March 4, 2026
London-based war risk underwriters are set to determine on Monday the revised high-risk boundaries and additional premiums for vessels transiting the Middle East after US-led strikes on Iran prompted Tehran to shut the strategically vital Strait of Hormuz. Nearly 20% of the world’s crude oil flows through this narrow waterway, making the disruption a major blow to global energy supply chains.
The escalating conflict is expected to create significant headwinds for India’s exporters and importers as marine insurers and global container lines move swiftly to mitigate exposure.
GIC Re Cancels War Risk Cover
On Sunday, GIC Re issued a notice cancelling its marine hull war risk cover effective March 3. The reinsurer has demarcated an extensive high-risk zone covering Pakistan waters, the Persian/Arabian Gulf and adjacent waters including the Gulf of Oman west of Longitude 58° East, Iran, countries under sanctions by the UN, UK, US or EU, the Sea of Azov and Black Sea waters, waters of Russia, Ukraine and Belarus, the Indian Ocean, Gulf of Aden and the Southern Red Sea.
“In case any vessel passes through this area or calls any port located in this area or is dry docked in any of these areas, it will be a breach of warranty,” the company said in its circular, adding that breach-of-warranty cover will not be available in respect of the seven designated zones.
The Strait of Hormuz handles roughly 21 million barrels of oil daily from Iran, Iraq, Kuwait, Saudi Arabia and the UAE. With its closure, oil shipments have effectively stalled.
Major Carriers Reroute, Suspend Bookings
Shipping lines have begun rerouting and suspending services in response to the deteriorating security situation.
Danish container major Maersk has paused future trans-Suez sailings through the Bab el-Mandeb Strait and suspended all vessel crossings in the Strait of Hormuz until further notice. Sailings on its ME11 (Middle East–India to Mediterranean) and MECL (Middle East–India to US East Coast) services will now be rerouted around the Cape of Good Hope.
In a March 1 customer advisory, Maersk said it would revert to the trans-Suez route once security conditions permit, describing it as the fastest and most efficient option for customers.
Mediterranean Shipping Company (MSC), the world’s largest container carrier, has suspended all worldwide cargo bookings to the Middle East region until further notice.
French carrier CMA CGM has also halted Suez Canal transits and is rerouting vessels via the Cape of Good Hope. It has introduced an Emergency Conflict Surcharge of $2,000 for 20-foot containers, $3,000 for 40-foot containers and $4,000 for reefer containers to and from Gulf ports, covering Red Sea ports in Saudi Arabia, Egypt, Jordan, Djibouti, Sudan and Eritrea.
More carriers are expected to follow suit, raising freight costs globally.
“A Testing Day” for Insurers
Marine insurance typically comprises Protection and Indemnity (P&I), hull and machinery, and war risk policies. Officials from London-based P&I Clubs indicated that Monday will be crucial.
“Monday will be a testing day,” an official from a London P&I Club said. “We will have clarity from the war risk underwriters on what additional premium will apply for ships transiting the conflict zone. The Strait of Hormuz will definitely attract a very heavy additional premium.”
War risk insurers have issued cancellation notices, with policies to be renegotiated or reinstated at sharply higher premiums once underwriters return to their desks. These additional costs will ultimately be passed on to cargo owners and customers.
While extra premiums are already levied for vessels transiting areas like the Red Sea, industry sources say those rates had remained minimal due to limited direct hostilities. A full-scale war-like event, however, could send premiums soaring.
Under standard charter party agreements, shipowners can recover additional war risk premiums from charterers if vessels are directed into high-risk zones.
Oil Trade Frozen, Floating Storage Builds
If the Strait remains shut, ships will be forced to stay put. “The Red Sea situation still allowed trade to continue. In the Strait of Hormuz, oil trade is totally blocked. It will remain frozen until the Strait is reopened and made navigable again,” the P&I official said.
Insurance expert Balasundaram R said recent developments demonstrate the decisive role of insurance markets in global trade flows.
“The underwriters’ decision to cancel cover and raise premiums to unsustainable levels has effectively halted the movement of crude and petroleum products through the Strait of Hormuz and the Persian Gulf,” he said.
With tankers unable to move due to lack of war risk cover, large volumes of crude are now anchored at ports or in relatively safer waters, creating massive accumulations of floating storage. “Oil prices are shooting up not only because of war, but to a much larger extent because war risk insurance is not available,” he added.
Risk of Global War Risk Cancellation
Balasundaram cautioned that reinstating war risk cover in a high-conflict zone may prove impossible, or premiums could be set at prohibitive levels.
He also flagged the implications of the “five powers war exclusion clause” embedded in marine policies. If any two among the US, UK, France, Russia and China enter into direct conflict, war risk cover would automatically cease worldwide, with or without notice.
Should major powers such as Russia or China directly join the conflict alongside Iran, global marine insurance markets could face unprecedented disruption — potentially paralysing maritime trade far beyond the Middle East.
For now, the world’s shipping and energy sectors await Monday’s decisions in London, which will determine how quickly — and at what cost — trade through one of the world’s most critical chokepoints can resume.
