Two Billion Dollars and Seventy Claims: What the Iran War Tells Owners About War Risk Cover

Six months into the conflict, the marine insurance market has a number.

David Osler, law and marine insurance editor at Lloyd's List, puts war risk claims arising from the fighting at roughly $2 billion across more than 70 filings. On his assessment it is exceeded, over the past decade, only by the payouts arising from the containership that brought down the Francis Scott Key Bridge in Baltimore in 2024. The International Maritime Organization has recorded more than 72 attacks on ships since March.

For shipowners, that figure answers a question that everything written about this conflict since February has raised without resolving. The war risk market repriced dramatically, issued cancellation notices, and quoted transit premiums that at points ran to ten percent of hull value. What nobody could say until now is whether, at the end of it, the cover actually paid.

It did. The more useful question is what that tells you about the market you are renewing into.

The Only Policy That Responded

Start with the structural point, because it is the one owners most often get wrong.

Standard hull and machinery policies exclude war. Standard P&I cover excludes war. Those exclusions are not oversights. They exist because war risk is a fundamentally different exposure, priced differently, reinsured differently, and written by a distinct set of underwriters.

The consequence is that a vessel struck by a missile, mined, seized, or detained in a conflict zone is looking at exactly one policy. The war risk hull placement, and the corresponding P&I war risk extension.

Across seventy-plus claims and two billion dollars, that is the cover that answered. Every other line in the program was, by design, silent.

That reframes what a war risk policy is. It is not an administrative supplement to the hull placement, bought because a charterer or a financier requires it. In a year like this one it is the entire recovery.

The Market Did Not Withdraw

The narrative through the spring was that insurers were retreating from the Gulf. Cancellation notices issued in early March, clubs withdrawing war risk extensions, premiums moving by a factor of forty. It looked like a market in flight.

The people running that market said otherwise, and the outcome supports them.

Chris Jones, chief executive of the International Underwriting Association, was direct at the time. IUA members were continuing to provide cover for clients affected by the hostilities across a number of lines of business, and trade had been halted not by a lack of available insurance but by obvious safety concerns. The market for marine war risks, he said, was operating in the manner one would expect.

Sheila Cameron, chief executive of the Lloyd's Market Association, put numbers to the exposure. Approximately 1,000 vessels sat in the Persian Gulf and surrounding waters, about half of them oil and gas tankers, with an aggregate hull value exceeding $25 billion. The vast majority were insured in the London market, and that insurance remained in place.

The distinction between those two propositions matters enormously for an owner planning next year.

Cover was withdrawn from specific voyages at specific prices. That is what cancellation provisions and additional premiums are for. Seven days' notice under Lloyd's wordings, forty-eight hours under some US forms, and repricing per transit.

Capacity was not withdrawn from the class. Underwriters kept writing. What changed was the price and the terms, which is what a functioning market does when the loss picture moves.

Owners who concluded in March that war risk cover was becoming unavailable drew the wrong lesson. The correct one is that it remained available and became expensive, which is a considerably better outcome and a more predictable one to plan around.

The Aggregation Test

The reason the London market watched this so closely is concentration.

A thousand vessels with $25 billion of aggregate hull value, in a confined body of water, insured predominantly in one market, exposed to a single peril event. That is textbook aggregation risk and it is precisely what reinsurers price for and worry about.

The scenario that keeps war risk underwriters awake is not seventy separate incidents. It is one event catching many vessels at once. A mining campaign that closes the strait with hundreds of ships inside it. A strike on a port where forty vessels are alongside.

That did not happen, and the loss developed as a series of individual casualties spread over six months rather than as a single aggregation event. Two billion dollars across seventy-plus claims averages under thirty million per claim, which is a large number of moderate losses rather than a small number of catastrophic ones.

The market absorbed it, and underwriters have indicated it could absorb multi-billion-dollar liabilities if the crisis persists. That is a meaningful statement about capacity, and it is the reason cover remains purchasable today.

Two Very Different Loss Profiles

The comparison to Baltimore is instructive beyond the ranking.

The Dali was one vessel, one event, one moment. A single hull, a single P&I entry, and a liability that reached into the billions because of what the vessel struck. The loss profile is catastrophic, singular, and concentrated on a small number of insurers and the International Group pool.

The Iran war loss is the opposite shape. Seventy-plus separate incidents, spread across many owners, many hulls, many placements, and many underwriters, accumulating over half a year.

For an owner the practical difference is in how the market responds. A single catastrophic loss produces a shock and then a correction. An attritional pattern of moderate losses over an extended period produces sustained repricing, because underwriters are pricing a continuing condition rather than absorbing a discrete event.

That is the more likely explanation for why elevated additional premiums have persisted rather than spiking and receding.

How the Market Funded It

Osler's assessment includes a qualification that owners should read carefully. The claims will be offset by heavily enhanced premium income.

Consider what that means. Pre-conflict transit additional premiums in the Gulf ran around 0.2 to 0.25 percent of insured value. At the peak, quotes ran from one percent to ten percent and beyond, with the widest spread reflecting genuine disagreement about how to price the risk rather than market inefficiency.

Multiply an elevated rate across every transit by every vessel that continued trading, over six months, and the premium pool moves substantially. The market repriced, collected, and paid.

For an owner, that arithmetic explains what happens next. A war risk market that lost two billion dollars and did not make it back would be contracting into next year. A market that lost two billion and offset it through premium is a market that will keep writing, at rates informed by the loss experience.

The practical prediction is continuity of capacity at elevated pricing rather than scarcity. That is a better planning assumption than either of the extremes owners have been working with.

What This Means for Your Renewal

Several things follow for an owner approaching a war risk placement now.

Treat the placement as a primary cover rather than an incidental one. This year demonstrated that it is the only line that responds to conflict perils. It deserves the attention normally given to the hull placement, including a proper look at limits, geographic scope, and wording rather than a renewal on expiring terms.

Understand your cancellation exposure precisely. Seven days under most Lloyd's wordings, and as little as forty-eight hours under some US forms. Cover in place today is not cover you can assume for a fixture next month, and the shorter the notice period the more actively you need to manage it.

Audit your notification process. Most war risk policies require prior notification before entering a listed area and payment of the additional premium. Failure to notify can void cover for that voyage entirely. Where a vessel returns to a trade it has avoided for months, a notification process that has fallen out of use is a live risk.

Confirm the P&I war risk extension separately. The hull war risk policy and the P&I war risk extension are different placements with different cancellation provisions. As we noted in March, it was the withdrawal of P&I war extensions rather than hull cover that accelerated the commercial shutdown of the strait. Both need checking.

Review your agreed values. As we covered recently, the insured value determines both the recovery on a total loss and the threshold at which a casualty becomes a constructive total loss. In a market where vessels are being damaged rather than destroyed, that threshold is doing real work.

Read the sanctions exclusions. Every war risk placement carries them, and in a theatre where one belligerent has established a permit regime and a non-compliant vessel list, the interaction between engaging with that regime and preserving cover is a live question rather than a theoretical one.

Document the transit decision. Where a master or an owner decides to transit or refuse, the contemporaneous record of the risk assessment is the material that supports a later claim and answers a later challenge.

The Bottom Line

Two billion dollars across seventy-plus claims is a significant loss for the marine war risk market and it is not a crisis. The market priced the exposure, collected the premium, paid the claims, and continued writing.

For shipowners the operative conclusions are narrower and more useful than the headline figure suggests.

The war risk policy is the only thing that responds when the peril is conflict, which makes it the single most important line in the program for anyone trading a contested region. Capacity remained available throughout, so the constraint on trading was safety and crew willingness rather than insurance. And the loss will be recovered through premium, which means the elevated rate environment is likely to persist rather than to correct sharply.

None of which is comfortable if you are the owner of one of the seventy-plus vessels. It does mean that the cover, tested at scale for the first time in more than a decade, did what it was sold to do.