Ship insurers cancel cover for certain war risks due to Iran conflict

Several marine insurers said they are cancelling war risk cover for ships due to the conflict in Iran and the Gulf. Insurers including Gard, Skuld, NorthStandard, the London P&I Club and the American Club said their cancellations will take effect from March 5, according to notices posted earlier this week on their websites, giving 72-hour notice of the cancellation from midnight that day. War risk cover will be excluded in Iranian waters, as well as the Gulf and adjacent waters.

The move follows US/Israeli attacks on Iran last weekend and the latter’s retaliatory actions. Brigadier General Ebrahim Jabbari of the Iran Revolutionary Gard Corps said on Monday.

Leading insurer Gard explained that it had received Notice of Cancellation from its reinsurers in respect of war risks in Iran and Persian/Arabian Gulf, and as a result, it was necessary for Gard to issue Notice of Cancellation in respect of the affected insurance covers.

Skuld commented: “It is already evident that reinsurers’ appetite for war‑risk exposure is tightening, and in practical terms, it will result in reinsurers withdrawing capacity at short notice.”

However, the London P&I Club specified that the cancellation notice applied only to Owners’ Fixed-Premium P&I and Charterers’ CSL cover and does not affect mutual P&I and FD&D cover and the Excess War Risks cover afforded to Assureds with mutual P&I Cover. The American Club likewise stated that its Notice of Cancellation does not apply to mutual entries for P&I and FD&D cover.

An insurance specialist professional business services’ body Maritime London adds: “certain press coverage has suggested that marine war-risk insurers have withdrawn all coverage. These reports are incorrect. It is important to distinguish between insurers issuing notices of revised ratings or—as the London Joint War Committee has done, effective 3 March—expanding the designated High Risk Area to include the littoral waters of Bahrain and Qatar, as well as the coastline of Oman, versus actually declining cover. War‑risk coverage remains available.”

Steamship Mutual, for example, advised its Members that it was cancelling all its existing Hull War policies with 7 days’ notice, reinstating them as of 10 March but incorporating new High Risk Areas: Bahrain, Djibouti, Kuwait, Oman and Qatar,

Gagan Ranu, partner at law firm Spence West LLP, commented: “War-risk premiums for tankers operating in or near the Gulf have surged, and a number of major shipping and cargo insurers have already withdrawn coverage altogether thus forcing shipowners to suspend voyages. This will inevitably give rise to a huge surge in legal disputes in relation to coverage, as well as those arising under charterparties, bills of lading, and finance agreements. Wider issues are also likely to arise such as where shipowners simply refuse to proceed to the region, as well as what will happen to the cargo on board vessels that are currently stranded there if the underlying contracts have effectively been frustrated. It would be fair to say that Shipping and International Trade lawyers are likely to be very busy for the foreseeable future.”