War Risk Insurance Cost: Rates, Backstops, and Hormuz Spike

The cost of war risk insurance is quoted as a percentage of a vessel’s hull and machinery value, and in peaceful waters it is almost nothing — as low as 0.001% of the ship’s value per year. In an active conflict zone it is a different animal entirely: priced per voyage, repriced constantly, and capable of running from a few tenths of a percent to 10% of hull value, which on a large tanker means millions of dollars for a single transit.¹² The gap between those two numbers is what makes war risk insurance one of the most consequential variables in global shipping.

How the Price Is Built

The baseline policy — annual hull war risk cover — is relatively cheap because it assumes the ship stays in ordinary trading waters. The real cost appears when a vessel enters a designated high-risk area. Underwriters maintain roughly 15 to 20 “additional premium” areas, and a ship sailing into one owes an Additional War Risk Premium, or AWRP, calculated as a percentage of the ship’s insured value for a limited window of seven or fourteen days. Stay longer, renew.³

Four factors drive the number:

The ship’s market value and size. The premium is a percentage of hull value, so a $138 million VLCC pays far more in dollar terms than a $20 million bulker at the same rate.
The region. Rates in the Western Hemisphere can be 0.001% annually; rates in the Persian Gulf during active conflict have hit 5% or more per voyage.¹
The duration of exposure. AWRP windows are short by design, so lingering in a listed area multiplies cost.
The underwriter’s current threat assessment, which can change in days.¹

Flag and ownership matter heavily. Vessels flagged, owned, or operated by entities linked to the United States, United Kingdom, or Israel have been charged two to three times the rate quoted to other ships in Middle Eastern waters.²⁴ Vessel age, condition, claims history, and no-claims bonuses move the final rate up or down.

Pricing itself is not centrally set. Hull war risk coverage is underwritten by Lloyd’s syndicates, International Underwriting Association company markets, and Nordic insurers, with rates negotiated case by case between underwriters and brokers.⁵ The Joint War Committee of the Lloyd’s Market Association designates which regions count as “Listed Areas”; it does not set the premium itself, but a listing is what forces the AWRP conversation in the first place. Entering a listed area without prior agreement can void the policy.⁶

What Coverage You Are Actually Buying

A single war risk “quote” usually bundles several lines. Hull war risks cover physical damage to the ship. P&I war risk coverage picks up the third-party liabilities — pollution, cargo damage, personal injury — because standard Protection and Indemnity policies exclude anything connected to war, civil war, revolution, rebellion, terrorism, mines, torpedoes, bombs, and missiles, along with capture, seizure, arrest, and forcible detainment.⁷⁸ Cargo war risk insurance protects the goods. Many owners also add war loss-of-hire coverage for revenue lost during detention or damage, and kidnap-and-ransom coverage for piracy, since ransom payments fall outside standard P&I.

Excess P&I war risk cover above the hull value carries aggregate limits. The standard aggregate is $500 million per occurrence, with regional sub-limits: $250 million for the Iran and Persian Gulf region, $200 million for the Indian Ocean and Gulf of Aden, and $150 million for Russia, Ukraine, and Belarus.⁸ For large casualties in those regions, those caps can matter as much as the headline premium.

What Recent Conflict Zones Cost

Strait of Hormuz: 2026 Spike

Before the 2026 conflict, AWRP for Persian Gulf transits ran between 0.1% and 0.25% of hull value. A $100 million vessel paid roughly $250,000 for a Gulf transit.⁹ Within days of coordinated strikes on Iran in late February 2026 and the subsequent closure of the Strait, rates reached 2.5% of hull value for ordinary transits, with U.S., UK, or Israel-linked vessels quoted at 5% or higher.¹⁰ Some stranded tankers reportedly paid 10%.²

In dollar terms: a five-year-old VLCC valued at roughly $138 million faced estimated insurance costs of $10 million to $14 million for one Strait of Hormuz transit.¹⁰ A crude-laden Suezmax was charged $7.5 million in AWRP alone, more than the $6.5 million freight for the entire voyage.²

On March 1, 2026, major P&I clubs — Gard, Skuld, NorthStandard, the London P&I Club, and the American Club — cancelled war risk coverage for the Gulf effective March 5. Lloyd’s and other markets followed, moving entirely to voyage-by-voyage pricing. Annual Gulf war risk policies stopped being written.¹¹⁹ Daily tanker transits through the Strait fell by about 95%, and roughly 400 vessels were anchored outside the waterway unable to secure insurance at any price.¹²¹³

A June 2026 ceasefire briefly raised hopes of falling premiums, but renewed hostilities on June 27 ended any near-term reset. As of late June 2026, Persian Gulf AWRP ranged from 3% to 8% of hull value, translating to $3 million to $8 million per large tanker transit. Underwriters indicated they would need two to four weeks of confirmed de-escalation before cutting rates, with a full return to pre-conflict levels taking months.¹⁴

Red Sea

Red Sea AWRP had climbed to around 0.5% of hull value during Houthi attacks on commercial shipping, then eased to roughly 0.2% by December 2025 after a Gaza ceasefire — the lowest level since November 2023.¹⁵

Black Sea

The Black Sea moved the other way. AWRP for ships bound for Russian Black Sea ports surged 250% from mid-November 2025 levels of 0.25% to 0.30% of hull value. Premiums for Ukrainian port transits rose to 0.8% to 1%, up from 0.4% in late November 2025, driven by drone strikes on tankers.¹⁵

Who Actually Pays the Premium

The shipowner buys the policy, but who bears the cost usually depends on the charter contract. Under the BIMCO CONWARTIME clause for time charters, the charterer must reimburse the owner for any additional war risk premium triggered by the charterer’s order to enter a dangerous area.¹⁶ The VOYWAR clause for voyage charters works the same way: if the charterer directs the vessel into a war risk zone, the charterer pays the extra premium, any additional crew bonuses, and related expenses.¹⁷

Both clauses let the owner refuse orders considered dangerous. If the charterer does not nominate a safe alternative port within 72 hours of the owner’s notice, the owner can discharge cargo at any safe port at the charterer’s cost.¹⁸ Under VOYWAR, freight is adjusted to reflect any deviation from the planned route. From there the cost flows down the chain to commodity traders, refiners, importers, and consumers.

For cargo, the trade terms decide. CIF (Cost, Insurance and Freight) requires the seller to arrange cargo insurance, but the minimum level does not include war risk; if the buyer wants Institute War Clauses protection, the seller must arrange it at the buyer’s cost.¹⁹ Under FOB (Free On Board), the buyer is responsible for insurance during the ocean voyage and must secure war risk cover independently.²⁰ If you are a buyer on FOB terms moving cargo out of a listed area, the AWRP lands on you.

When Governments Backstop the Price

When private rates spike or markets withdraw entirely, government programs can effectively cap what shipowners pay — or make coverage available where it otherwise would not exist. In the United States, the Maritime Administration (MARAD) has standing authority under 46 U.S.C. Chapter 539 to provide war risk insurance and reinsurance when commercial coverage is unavailable on reasonable terms. The program covers American vessels, qualifying foreign-flag vessels, cargo, and related liabilities, with P&I coverage capped at $750 per gross ton.²¹ A condition of the coverage is that the vessel must be made available to the government in time of war or national emergency.²²

The 2026 Hormuz crisis prompted a larger intervention. On March 3, 2026, President Trump announced that the U.S. International Development Finance Corporation (DFC) would provide political risk insurance and guarantees for maritime trade in the Gulf.¹¹ On March 11 the DFC launched a public-private reinsurance facility with Chubb as lead underwriter. By early April the program had expanded to $40 billion in rolling coverage — $20 billion from the DFC and $20 billion from a consortium including Chubb, Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr, and CNA.²³

The facility covers war marine risk insurance for hull, liability, cargo, and P&I. Eligibility runs through sanctions and “Know Your Customer” vetting, and vessels must meet DFC and interagency criteria.²³ The DFC has a statutory liability cap of $205 billion through 2031, of which $51.5 billion was already committed by the end of 2025. JPMorgan energy analysts estimated that covering the 329 oil vessels operating in the region would require roughly $352 billion, well beyond the DFC’s capacity absent congressional expansion.¹³ For most non-U.S. operators, the DFC facility is not an option, which keeps the private market quote the binding number.

Why Prices Are Unlikely to Reset

Reinsurance broker Howden Re called the current environment a “permanent structural repricing” rather than a temporary spike.⁹ Reinsurers are cutting line sizes on exposed programs, shifting to case-by-case underwriting, and watching accumulation risk — the chance that a single event triggers claims across many policies at once. Lockton’s Darshan Parikh described automatic repricing triggers for designated conflict zones as becoming “standard practice across specialty lines.”²⁴ Oscar Seikaly, CEO of NSI Insurance Group, said underwriters maintain a long memory about regional instability and that premiums are unlikely to return to pre-war levels in the near term because insurers now view the Gulf region as capable of rapid, repeated disruption.²⁵

Historical context sharpens the point. During the 1980s Iran-Iraq Tanker War, hull rates near Iran’s Kharg Island hit 7.5% in May 1984 after an attack on the tanker Yanbu Pride, and total insurance claims from that war reached $2 billion. The 2003 Iraq invasion pushed rates to 3.5% of hull value before falling to 0.25% within a year.¹ Past spikes receded. The 2026 Howden Re view is that the combination of 2024-25 Red Sea losses and the 2026 Hormuz crisis has set a permanently higher baseline this time.⁹

One factor pulls in the opposite direction: a large shadow fleet operating without conventional cover. The Kyiv School of Economics identified 4,539 shadow tankers, with P&I insurance providers identifiable for only 6.3%.²⁶ Those ships depress demand for legitimate coverage but do not change the quote a mainstream operator receives at a Lloyd’s broker.

For a shipowner, charterer, or trader pricing a voyage today, the practical picture is this: war risk is now a per-voyage line item that can swing from immaterial to multi-million-dollar inside a week, moves on the Joint War Committee’s listing decisions and current underwriter sentiment, and gets charged at a steep multiple if the vessel ties back to the U.S., U.K., or Israel in a Middle East transit. Build the AWRP into the freight calculation, confirm who pays it under the charter, and expect quotes to come voyage by voyage until the market sees a sustained period of calm.

1
Strauss Center. Strait of Hormuz Insurance Market
2
S&P Global. War Risk Insurance Cost Off Highs but Still Elevated in Persian Gulf
3
Hellenic War Risks. AP Area Cover Explained
4
Lloyd’s List. US, UK, and Israeli Ships Charged Three Times More Than Others for Middle East War Cover
5
Lloyd’s Market Association. Joint War Committee
6
The Swedish Club. Listed Areas as per 13 March 2026
7
The Swedish Club. War Risks
8
Steamship Mutual. War Risks Cover FAQs
9
Howden Re. Strait of Hormuz Report
10
Lloyd’s List. Gulf War Risk Premiums Topping Double-Digit Millions of Dollars per Trip
11
Al Jazeera. Maritime Insurers Cancel War Risk Cover in Gulf
12
World Economic Forum. How the Middle East War Is Turning Governments Into Insurers of Last Resort
13
Economist Intelligence Unit. War Risk Premiums Surge
14
Insurance Business Magazine. War Risk Insurance Braces for Prolonged Elevated Premiums as Hormuz Ceasefire Buckles
15
S&P Global. Maritime War Risk Premiums Fall in Red Sea, Rise in Black Sea
16
BIMCO. War Risks Clause for Time Chartering 2013
17
BIMCO. War Risks Clause for Voyage Chartering 2013
18
Mills & Co. War Risk Clauses
19
Trade Finance Global. CIF Price Cost Insurance and Freight
20
Chubb. Ocean Cargo Incoterms Insurance
21
eCFR. War Risk Protection and Indemnity Insurance
22
Office of the Law Revision Counsel. War Risk Insurance
23
DFC. DFC and Chubb Announce Additional American Reinsurance Partners and $40B Coverage
24
Lockton. Marine and Aviation War Risk Premiums Rise as Insurers Reassess Exposure
25
The New York Times. Strait of Hormuz Shipping Insurance Iran
26
Kyiv School of Economics. Shadow Fleet Insurance