How war-risk insurance works
Standard hull and machinery insurance excludes war risks. Vessels transiting risk zones buy separate "war risk" cover, priced as a percentage of the vessel's insured value per transit. A 0.1% war-risk premium on a 100 million-dollar tanker is 100,000 dollars per trip; a move from 0.05% to 0.5% is the kind of jump that surfaces in news coverage.
The Joint War Committee
The Lloyd's Market Association Joint War Committee maintains a list of areas designated as "listed" for war and related perils. Inclusion on the list does not require insurance; it triggers notification and adjusted pricing. The Gulf, the Red Sea, and adjacent waters are routinely on the list. JWC announcements move freight rates and routing decisions.
Freight rates
Freight rates respond to expected disruption: longer routes (Cape of Good Hope instead of Suez), slower transit, lower vessel availability, and demand-side substitution to alternative origin ports. The freight-rate signal is more sensitive than the spot oil price and tends to lead it during regional crises.
What to watch
- JWC list changes for the Gulf and Red Sea.
- Tanker spot rates (BDTI, BDLS indices).
- Insurance premium quotes via specialty broker reporting.
- Routing changes visible in AIS data — Cape of Good Hope rerouting is the headline scenario.