GIC Re withdraws marine cargo war cover for facultative contracts

State-owned reinsurer GIC Re withdraws marine cargo war cover for facultative reinsurance contracts in several high-risk maritime zones amid rising tensions near the Strait of Hormuz

Days after withdrawing marine hull war cover in several high-risk regions, state-owned General Insurance Corporation of India (GIC Re) said it would cease providing marine cargo war cover in these areas from 11.59 hours of March 7.

 

In a communication to insurers, the reinsurer said the decision applies to facultative reinsurance contracts, a coverage purchased by a primary insurer to cover a single risk — or a block of risks — held in its book of business. 

This insurance provides an insurer with coverage for specific individual risks that are unusual or so large that they aren’t covered in the insurance company’s reinsurance treaties. 

 

The move comes amid rising geopolitical tensions in parts of the Persian Gulf and West Asia near the Strait of Hormuz, which is key to international trade. The region handles almost 20 per cent of the global oil trade.

 

Due to the heightened tensions, several major cargo carriers have either suspended transits through the Strait of Hormuz entirely or opted to shelter their cargo at “safe” fallback hubs like Salalah or Jeddah, creating congestion in these ports.

 

GIC Re’s notice of cancellation applies to cargo in several high-risk zones, including Pakistan waters; the Persian or Arabian Gulf, Gulf of Oman, Indian Ocean, Gulf of Aden and the southern Red Sea; Iran and other countries under sanctions imposed by the UN, UK, US or EU; the Sea of Azov and Black Sea waters; and the waters of Ukraine, Russia, and Belarus.

 

The reinsurer has also classified the Indian Ocean, Gulf of Aden and southern Red Sea; parts of Eritrea; and Bahrain, Djibouti, Kuwait, Oman and Qatar as high-risk zones.

 

Earlier, GIC Re had withdrawn marine hull war cover for vessels sailing through the region. The notice of cancellation by the reinsurer implies that any new cargo voyage into these zones will not be covered by insurance. However, cargo that has already departed will retain the existing war cover.

 

The standard notice period for cancellation of War, Strikes, Riots, and Civil Commotions risks ranges between 48 hours, 72 hours or 7 days. Experts said that after the notice of cancellation ends, the reinsurance company may offer new contract terms with revised rates or entirely withdraw coverage for the route.

 

The reinsurer has also requested cedants to approach GIC Re in advance for war cover exclusion buyback.

 

The reinsurer said, “Upon receipt of complete information, GIC Re will overview the client's requirements and consider reinstating the coverage with revised premium, terms and conditions.”