Background

War risk coverage is the marine insurance clause that pays when a vessel or cargo is lost through acts of war, mine strikes, or hostile seizure. Standard P&I and hull policies exclude war; shipowners buy it separately through syndicates at Lloyd's of London and mutual clubs such as Skuld, the London P&I Club, and the American Steamship Owners Mutual P&I. Premiums surge whenever a waterway becomes contested; the Persian Gulf has triggered war risk exclusions in every major tanker conflict since the 1980s Tanker War.

Three major P&I clubs cancelled Gulf and Gulf of Oman War risk coverage with 72 hours' notice from 2 March, effective midnight 5 March, leaving vessels without the insurance required to obtain port clearance or financing. VLCC freight rates hit an all-time high of $423,736 per day as shipowners priced the elevated risk into charter rates.

The US Development Finance Corporation stepped in with government-backed cover for US-aligned shipping, a scale of state intervention not seen since the US War Risk Insurance Act of 1914. Roughly 60% of Gulf oil flows to Asia, and Chinese, Russian, and Indian tankers operate under separate commercial arrangements, leaving the collapse unresolved for the bulk of Gulf trade.

Common Questions

What is war risk coverage?

War risk coverage is a specialist marine insurance clause that pays out when a ship or its cargo is lost, damaged, or seized due to acts of war, mines, or hostile action. It is sold separately from standard hull and P&I policies, which exclude war as a matter of course. Underwriters can cancel it at short notice when risk becomes unquantifiable.Source: International Maritime Organisation

Why did P&I clubs cancel Gulf war risk coverage in March 2026?

American Steamship Owners Mutual P&I, London P&I Club, and Skuld issued cancellation notices effective midnight 5 March 2026, citing the IRGC blockade of Hormuz. Without P&I cover, vessels cannot obtain port clearance or commercial financing, effectively grounding Gulf-bound tankers regardless of their willingness to transit.Source: P&I club cancellation notices

Is the US providing war risk insurance for Gulf shipping?

Yes. President Trump announced that the US Development Finance Corporation would provide political risk insurance for US-aligned maritime trade in the Gulf, backed by potential Navy escorts through Hormuz. The arrangement covers ships under US or allied flags; Chinese, Russian, and Indian tankers are not included.Source: DFC announcement

What is the difference between war risk coverage and standard P&I insurance?

Standard P&I (Protection and Indemnity) insurance covers third-party liabilities such as crew injury, cargo damage, and oil spills under normal trading conditions. War risk coverage is a separate, cancellable policy that specifically covers losses attributable to armed conflict, piracy, mines, and hostile seizure. P&I clubs can cancel war risk with 48-72 hours notice; standard P&I has longer cancellation periods.Source: International Group of P&I Clubs

How much did Gulf war risk premiums increase in 2026?

Premiums became effectively incalculable after P&I clubs cancelled outright in early March 2026. Before cancellation, rates had risen sharply alongside VLCC freight rates, which hit an all-time high of $423,736 per day — a 94% increase in a single week — as shipowners priced conflict risk into Charter rates in lieu of available insurance.Source: VLCC freight market data

How the World Sees Them

China

China imports roughly 40% of its crude from the Gulf and operates tankers outside Western P&I club cover. Beijing has declined to join the US-led escort coalition and faces the insurance gap directly, pushing state-owned tankers into higher-risk routes without the coverage Western fleets require.

United States

The US provided maritime insurance only in wartime emergencies; Operation Earnest Will in 1987 offered Navy escorts but no state cover. The Trump administration revived the 1914 War Risk Insurance Act, extending DFC cover to US-aligned shipping while excluding Chinese, Russian, and Indian tankers.

United Kingdom

Lloyd's of London syndicates lead the global war risk market and set benchmark premiums that smaller insurers follow. With the Gulf declared an exclusion zone, Lloyd's pricing now sets the floor for any reinstatement once hostilities ease, creating a commercial chokepoint alongside the military one.

Shipping industry

P&I clubs 72-hour cancellation clauses were designed for manageable escalations, not a full blockade. The simultaneous withdrawal of three major clubs signals that the market cannot price ongoing hostilities at sustainable premiums, effectively halting new entries into the Gulf regardless of military escort availability.