Standard war risk coverage and its importance
Standard insurance covers exclude war risks. In almost all marine insurance covers, it is normal practice to add a ‘standard war cover’ to the policy. We, as Charterers Liability Insurance specialists, also do so.
The standard war risk cover proves its significance if, in an unexpected situation where there is in fact no war risk (yet), there is nevertheless an incident caused by an act of war. In such a case, the damage is covered by standard war insurance.
Excluded areas and the need for additional coverage
In areas where war risks are current, there will always be a notice of cancellation of the standard war risk policy and the war risk area will be designated as an ‘excluded area’. If a ship and/or cargo sails to such an area, an additional application is made to get cover during the period that ship and/or cargo stays in the ‘excluded area’.
Currently, the war between Ukraine and Russia, and the situation of the Houthi attacks on ships in the Red Sea are very actual. Both areas are excluded areas. Besides the war risk issue, which in itself is a disruption to normal shipping traffic, it also affects commercial decisions that carriers and cargo owners have to make.
Impact on shipping routes and economic consequences
The effects of recent disruptions caused by war risks have an impact on shipping routes. Avoiding passage through the Red Sea means sailing around through South Africa. On a round trip, that’s at least 20 extra sailing days. Shipping traffic to and from the Black Sea is obviously also disrupted.
The reshaping of shipping activities has an economic and commercial impact. For the underwriting of marine liabilities, in which IMU operates there are few effects. The only issue is that there is no cover for war risks in excluded areas, and we are often asked to offer a ‘buy back’ war risk policy. For this, we depend on war risks underwriters with the result that we have to confront our clients with a high additional premium.
The economic impact of global shipping disruptions on underwriting insurance covers is not significant. To the contrary, war risks underwriters collect huge extra premiums.
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