$100 mn marine insurance pool on cards for vessels sailing via war zones

Indian insurers plan $100 million marine insurance pool to cover war risks for ships amid West Asia conflict, with possible government support and rising premiums

Indian general insurers and reinsurers are looking to set up a marine insurance pool worth $100 million to provide war insurance cover to vessels sailing through high-risk zones. This comes against the backdrop of the West Asia crisis, which has severely impacted maritime trade across the globe, including that of Indian exporters. Any additional support for the pool is likely to be offered by the government in the form of sovereign guarantees, sources aware of the development said.

 

The insurance industry is in discussions to provide capacity amounting to 8 per cent of their marine premium collected till February 2026. The pool will be managed by General Insurance Corporation of India (GIC Re) with participation of general insurers underwriting marine business.  According to experts, marine insurance does not cover war-related risks, but companies can buy an additional war-risk cover. Considering current and similar scenarios in the future, this coverage has become expensive and risky for insurers to offer.

 

The insurance pool would act as a shock absorber as well, spreading bigger losses across participants. At present, India has an insurance pool for high-cost risks like incidents of terrorism and nuclear disasters managed by GIC Re.

 

Marine insurance premiums continued to be elevated owing to the West Asia conflict. Consequently, several reinsurers have issued notice of cancellation for vessels passing through the route, including GIC Re.  Several shipping companies have either stopped travelling through the route and are exploring alternate routes or have stopped sailing entirely. Experts also said that vessels and cargo transiting the region, which used to purchase additional war cover of around 0.25 per cent before the conflict, have seen premiums rise to 0.5–1 per cent. Despite available capacity, war covers are currently offered only at elevated rates and on a highly restricted basis due to prevailing uncertainty.

 

The conflict has disrupted shipments of about one-fifth of the world’s oil and liquefied natural gas through the strait, affecting the movement of oil and other key goods. Despite, the two-week ceasefire, the premiums continue to be on the higher side due to heightened uncertainty.

 

Stephen Rudman, head of marine, Asia, Aon said, “From an insurance perspective, a two-week ceasefire is insufficient in materially changing risk pricing or an underwriting stance. Additional war-risk premiums are driven by forward-looking threat assessments rather than short-term political developments,”

 

“While the announcement may help stabilise sentiment and reduce some near-term volatility, underwriters are likely to treat this as a temporary pause rather than a resolution of the geopolitical risk. As such, we would expect continued scrutiny on Gulf transits, with elevated war-risk pricing broadly remaining in place until there is clearer evidence of a sustained de-escalation,” Rudman added. 

Safety net 

• Insurers may contribute 8% of their marine premiums until February 2026 towards the pool 
• Additional war cover for marine insurance is available, but limited and expensive
• Two-week ceasefire insufficient in materially changing risk pricing or an underwriting stance, say experts
• Additional war-risk premiums are driven by forward-looking threat assessments
• Elevated war-risk pricing broadly to remain in place