War Risk Insurance for Shipping: Indian Exporters and Owners in Contested Waters

War risk insurance for shipping protects vessels and cargo against loss or damage caused by war, armed conflict, terrorism, piracy, and related hazards in contested maritime zones. Unlike standard marine insurance, which excludes war-related losses, war risk coverage is a separate policy or endorsement that explicitly covers these perils. For Indian exporters who ship goods through contested waters and for Indian shipowners operating vessels in high-risk regions, war risk insurance is essential to maintain trade flows and protect asset values.

The Joint War Committee (JWC), a body comprising major Lloyd's of London syndicates and representatives of the international insurance industry, maintains the definitive list of high-risk maritime zones where war risk premiums are elevated or coverage is restricted. These are known as the JWC red list (or sometimes categorized as red, amber, or green zones based on risk level). The JWC updates this list regularly based on intelligence about active conflicts, piracy hotspots, state-sponsored maritime threats, and terrorist activity.

As of April 2026, key JWC red-list zones for Indian shipping include the Red Sea and Gulf of Aden (due to Houthi missile and drone attacks on commercial shipping since late 2023), the Strait of Hormuz and Persian Gulf (due to geopolitical tensions between Iran and Western powers), the Black Sea (due to Russia-Ukraine conflict and attacks on civilian shipping), and portions of the Eastern Mediterranean near Syria and Lebanon (due to state and non-state actor activity). These zones account for a significant portion of Indian maritime trade. Major Indian exporters (particularly those shipping oil, chemicals, fertilizers, grains, and containerized goods) regularly transit Red Sea and Hormuz routes, and Indian shipowners operate vessels in all these regions. The presence of these routes on the JWC red list has created operational and cost challenges for Indian exporters since late 2023, when Houthi attacks on Red Sea shipping intensified.

Beginning in November 2023, Houthi forces in Yemen began launching missile and drone attacks against commercial vessels transiting the Red Sea, in apparent response to the Gaza conflict and statements claiming solidarity with Palestinian militants. Over 70 merchant vessels were attacked between November 2023 and March 2025, with several ships sunk or severely damaged. Indian flagged and Indian-managed vessels were among the targets; in some cases, attacks resulted in direct damage to Indian-owned or Indian-chartered vessels operating cargo for Indian exporters.

The Red Sea attacks created immediate disruption to Indian maritime trade. Many Indian exporters and shipping lines abandoned the direct Suez Canal route (which passes through the Red Sea) and instead rerouted vessels around the Cape of Good Hope at the southern tip of Africa, adding approximately 10-12 days to voyage duration and increasing fuel, crew, and port costs. For time-sensitive exports such as perishables, pharmaceuticals, and high-value electronics, the delay increased inventory carrying costs and reduced competitiveness in export markets.

War risk premiums for Red Sea transits increased sharply. Standard war risk premiums for Red Sea passage, historically in the range of 0.02% to 0.05% of insured value per voyage, rose to 0.10% to 0.50% or higher during peak attack periods. Some insurers temporarily suspended or restricted cover for the Red Sea. Shipowners faced similar challenges on hull war policies, with premiums rising and some withdrawal of capacity.

Indian exporters responded by negotiating war risk insurance with brokers and underwriters, rerouting shipments through longer but safer passages, and in some cases passing increased insurance and transit costs to customers. By mid-2025, after a reduction in Houthi attacks (partially due to US and coalition military response) and increasing availability of insurance capacity, Red Sea premiums moderated somewhat, but remained elevated compared to pre-2023 levels. Indian companies with regular Red Sea transits began building war risk insurance into their standard supply chain and procurement processes, treating it as a permanent operational cost rather than an exceptional charge.

War risk policies for shipping are typically written on a 'notice basis,' meaning that if a vessel enters a JWC red-list zone without prior notice to the insurer, the insurer may deny a claim if loss occurs in that zone. This creates a critical operational requirement for shipowners and operators: they must notify their war risk insurer and obtain coverage before the vessel transits the red-list zone.

If a vessel enters a red-list zone without notice, or if the insurer provides notice that coverage is being restricted or cancelled and the vessel nevertheless continues into that zone, the insurer may impose a 'breach of warranty' exclusion. This means even if the vessel was previously insured for war risk, the coverage lapses upon entry into the red-list zone without notice, and the insurer is not liable for losses in that zone. For example, if a vessel receives notice from its war risk insurer that as of a certain date, the Red Sea is being moved to a higher-risk category and all vessels entering the Red Sea must pay higher premiums, and the shipowner ignores this notice and sends the vessel into the Red Sea without obtaining updated coverage, a breach of warranty occurs and the insurer will likely deny claims for any Red Sea losses.

Most war risk policies include a 48-hour notice cancellation clause, which allows the insurer to cancel war risk coverage on 48 hours' notice if the insurer determines that the risk has materially increased or if the insurer wishes to exit the account. This is important because it gives insurers flexibility in volatile geopolitical situations where risk can shift rapidly. During the Houthi attacks in 2024, several war risk insurers invoked this clause to cancel coverage for Red Sea transits on short notice, forcing shipowners to scramble to find alternative coverage or delay vessel transits until new insurance was secured.

For Indian shipping companies and exporters, compliance with notice requirements is essential. Vessels should be fitted with systems to track their position relative to JWC zones, and operators should maintain regular communication with their war risk brokers and insurers. If a vessel is in an amber zone and moving toward a red zone, the operator should notify the insurer well in advance (24-48 hours minimum) and confirm that coverage is in force for the red zone transit. Failure to do so exposes the shipowner to a breach of warranty and potential denial of claims.

War risk insurance is offered in two parallel markets: hull war (covering damage to the vessel itself) and cargo war (covering damage to the goods being transported). These are separate insurance products with distinct underwriting, pricing, and claims processes, though they are often placed by the same underwriter at Lloyd's.

Hull war coverage protects the shipowner against loss or damage to the vessel caused by war, terrorism, piracy, or related perils. A hull war claim might arise if a vessel is hit by a missile or drone, struck by an improvised explosive device, or attacked by armed pirates. Hull war is priced as a percentage of the vessel's insured value (typically 0.15% to 1.00% of hull value per annum, varying with vessel type, age, and route). Older vessels in high-risk zones command higher premiums. Hull war policies typically have a deductible (e.g., USD 100,000 per claim) and may exclude certain perils (e.g., capture, ransom, or detention not involving physical damage).

Cargo war coverage protects the cargo shipper and owner against total loss or damage to cargo caused by war, terrorism, or piracy. Cargo war is priced per voyage or per shipment and is typically 0.05% to 0.50% of the cargo value, depending on the route and the cargoes being shipped. High-value cargo (electronics, pharmaceuticals, precious metals) may face higher premiums; bulk commodities (grain, fertilizer) typically lower premiums. Cargo war claims tend to be high-value when they occur: a cargo-laden container ship or bulk carrier destroyed or hijacked in a contested zone can result in cargo claims reaching USD 10 million to USD 50 million or more.

The interaction between hull and cargo coverage is important. If a vessel is attacked and cargo is lost, both the shipowner (under hull war) and the cargo shipper/owner (under cargo war) may have claims. These claims are often coordinated: the hull war claim covers the vessel's repair or constructive total loss, while the cargo war claim covers the cargo loss. Double recovery is avoided through the principle of subrogation: if the cargo war insurer pays the shipper and recovers some or all of the cargo's value through a salvage operation or third-party recovery, the amount recovered is shared pro-rata among the insurers. For Indian exporters and shipping companies, understanding the distinction and ensuring both hull and cargo war coverage are in place is critical when transiting high-risk zones.

In certain high-risk zones, particularly the Strait of Hormuz and Gulf of Aden (historically, prior to the recent Houthi escalation), the primary war risk was not vessel destruction but crew kidnapping for ransom by Somali pirates or other maritime criminal groups. Some war risk policies extend to cover crew ransom payments, while others focus purely on physical damage to the vessel and cargo.

Crew kidnap and ransom (KNR) is now less common in the Red Sea zone due to increased international naval presence and anti-piracy operations, but remains a risk in the Strait of Hormuz if Iran's Islamic Revolutionary Guard Corps (IRGC) or associated militias interfere with vessels. KNR coverage reimburses the shipowner for ransom payments made to secure the release of crew members, and typically includes crisis response support from security specialists.

For Indian shipping companies operating in the Persian Gulf or Strait of Hormuz, KNR coverage is often essential. Insurance policies covering these zones should be reviewed to confirm whether crew ransom is included or needs to be added via endorsement. Some shipowners place crew ransom coverage as part of their war risk package; others place it separately. The premiums for KNR in these zones are typically 0.05% to 0.15% of the vessel's value per annum.

The interaction between war risk (which covers physical damage) and crew ransom risk (which covers ransom payments and loss of income during detention) requires careful policy coordination. A vessel transiting the Strait of Hormuz might have three separate coverage layers: (1) hull war covering physical damage to the vessel, (2) cargo war covering damage to the cargo, and (3) crew ransom coverage covering ransom payments and crew welfare if crew are seized. Ensuring these three layers are in place and coordinated is a function of the vessel's insurance broker and the shipowner's risk management team.

The reinsurance market plays a critical role in war risk coverage for shipping. War risk is a high-peril category with the potential for cluster losses (multiple vessels attacked in a short timeframe) and very large individual claims. Consequently, primary insurers and syndicates at Lloyd's purchase reinsurance to cover their war risk exposures.

The General Insurance Company Reinsurance Limited (GIC Re), India's sole public reinsurer, holds a significant portion of Indian shipping industry war risk exposures through reinsurance treaties with Indian primary insurers. GIC Re manages a pool of war risk exposures and seeks further reinsurance in international markets. The GIC Re pool is important for Indian shipping companies because it ensures that Indian insurers can provide war risk coverage without being constrained by global reinsurance capacity, and because GIC Re's capital and reinsurance relationships provide stability to the Indian war risk market.

However, global capacity for war risk insurance has been tight since the Russia-Ukraine conflict began in February 2022. The Ukraine war created a sudden surge in demands for war risk coverage (not just for shipping, but for aviation, aerospace, and other transport modalities), and this caused premiums to spike and some reinsurers to restrict capacity. The Houthi attacks in 2023-2024 further stressed the market. Capacity has gradually increased since mid-2024, but remains below pre-2022 levels. The effect is that shipowners seeking war risk coverage, particularly for high-value vessels or long-duration policies, may face higher premiums and restrictions (e.g., zone exclusions) compared to the pre-2022 market.

For Indian exporters and shipping companies, this tight capacity environment means that sourcing war risk insurance early (rather than close to the voyage date) is advisable, and that building relationships with brokers and underwriters with access to GIC Re capacity and international reinsurance markets is important. Companies with regular war risk needs should consider annual umbrella policies that cover all transits in designated high-risk zones, rather than seeking voyage-by-voyage coverage, as annual policies tend to receive more favorable pricing and terms.

Indian exporters and shipowners should adopt a systematic approach to war risk insurance that integrates with their overall supply chain and risk management strategy. The first step is to map the company's regular shipping routes and identify any transits through JWC red or amber list zones. For exporters shipping through the Red Sea and Hormuz (which account for a substantial portion of Indian exports to Europe, Middle East, and Africa), war risk insurance is effectively mandatory.

The second step is to determine the optimal coverage architecture: whether to purchase war risk coverage on a voyage basis (for each shipment), or on an annual basis covering all designated routes and zones. Voyage-by-voyage coverage is more expensive per shipment but provides flexibility if the company's routing changes. Annual umbrella policies are more cost-effective for companies with regular high-volume trade but require commitment to designated routes throughout the year.

The third step is to source coverage from brokers with access to Indian and international underwriting capacity. Large Indian exporters and shipping companies typically work with international brokers (such as Marsh, Willis, Aon, or BMS) who have relationships with Lloyd's syndicates, GIC Re, and international reinsurers. Medium-sized companies can work with Indian brokers who have international relationships, or directly with Indian insurers such as ICICI Lombard or HDFC ERGO who underwrite shipping war risk.

Fourth, the company should establish operational protocols to ensure compliance with war risk policy conditions. This includes maintaining real-time position tracking for vessels, promptly notifying the insurer before entering high-risk zones, understanding the 48-hour cancellation clause and ensuring that coverage is maintained throughout the voyage, and maintaining detailed documentation of the voyage route, goods manifests, and any deviations or incidents.

Finally, companies should review their war risk coverage annually and update it based on changes in geopolitical conditions, the JWC red list, and their own trading patterns. A company that has shifted its export markets or vessel routes should notify its war risk insurer and ensure that coverage remains aligned with actual risk exposure.