The Middle East, a critical hub connecting Europe, Asia, and Africa, is experiencing heightened instability, leading to a sharp increase in maritime security risks. This has triggered a series of chain reactions, including route adjustments, soaring costs, and supply chain disruptions.

Multiple marine insurers have issued cancellation notices, withdrawing war risk coverage for vessels operating in the Gulf region effective March 5th. New policy clauses now list all war risk claims arising from Iran and Iranian waters—including coastal waters within 12 nautical miles—as well as the Persian/Arabian Gulf and adjacent waters as exclusions. This reflects the elevated risk level in the region and applies higher additional war risk premiums to these areas.

War risk insurance typically provides compensation to shipowners for losses and damages caused by acts of war and terrorism. An industry expert explained that war risk coverage is usually offered as an add-on to marine insurance policies such as hull insurance and cargo transportation insurance. Its pricing is based on risk assessments, including the risk level of the shipping route, vessel value, type of cargo, and historical loss data, often involving additional premium charges.

In response to the Middle East situation, Lloyd's stated it is maintaining close communication with market participants to better understand risk exposures. The organization noted that the region presents multiple categories of insurance exposure, covering aviation, shipping, energy, and political violence and terrorism. Estimating insurance losses at this stage is highly complex and uncertain.

On February 28th, Israel and the United States launched joint military strikes on multiple targets inside Iran. Although most targets were inland, reports indicated that several Iranian ports were also attacked.

A legal representative from Gard UK recently stated that on March 1st, the UK insurance market issued war risk coverage cancellation notices in response to the rising risk level. Shipowners intending to sail to affected areas must arrange additional war risk coverage separately. For vessels already in the region, existing premiums are likely to remain applicable, subject to specific policy terms.

The fact that war risk insurers have issued cancellation notices and raised premiums strongly indicates that the region is now considered high-risk and unsafe. It has been suggested that for most vessels, Persian Gulf ports may be deemed unsafe, and shipowners have the right to refuse orders to proceed to such areas.

War risk insurance is typically an add-on coverage and cannot be purchased independently. Common primary insurance combinations include hull insurance with war and strikes coverage, marine cargo insurance with war risk extension, and aircraft insurance with war and hijacking coverage.

On March 1st, Gard AS announced it had received war risk coverage cancellation notices from reinsurers for Iran and the Persian/Arabian Gulf region, with affected coverage canceled as of March 5th.

Affected insurance types include charterers' P&I coverage, traders' P&I coverage, charterers' general liability, extended liability, bunker coverage, carriers' comprehensive liability, fixed-premium crew insurance, extended crew coverage, tour operators' passenger liability, deviation liability, divers' insurance, vessel general liability, charterers' loss of use, freight loss, and charterers' interest insurance.

According to a war risk cancellation notice from Steamship Mutual, the cancellation applies to all charterers' coverage, fixed-premium P&I insurance reinsured outside the International Group pool, and any owner/charterer war risk add-ons or extensions. Notably, the association may offer buy-back coverage for the above exclusions, with limits up to $200 million.

Analyzing the reasons behind war risk cancellations, an industry analyst noted that as risks surge sharply, reinsurers' willingness to underwrite war risk coverage declines significantly, leaving primary insurers unable to effectively spread risk. When risk probability and potential losses cannot be reasonably priced through actuarial methods, insurers opt for risk avoidance rather than accepting uncertain losses.

The global head of marine at Marsh also pointed out that the suspension of related coverage aims to reassess the elevated risks in the Middle East and reevaluate premium rates.

The Middle East turmoil is not only impacting cross-border shipping safety but also expanding insurance risk exposures across multiple sectors such as energy, trade, and logistics, introducing multiple uncertainties for global supply chain stability and corporate operations.

Regarding potential solvency risks for the industry, an expert indicated that high insurance exposures currently exist in Middle Eastern shipping, energy facilities, and infrastructure, with maritime transport, oil fields, and port operations being particularly vulnerable. If insurance and reinsurance institutions face concentrated conflict-related claims, theoretical solvency pressure exists. However, the industry typically relies on reinsurance arrangements, global risk dispersion mechanisms, and capital reserves to buffer risks. While localized risk concentrations may pressure some institutions, the overall industry retains adequate response mechanisms.

Another expert emphasized that insurance risk exposures in the Middle East have expanded beyond traditional energy facilities and shipping routes to include cross-border infrastructure projects, overseas assets of Chinese companies, and personnel safety. He stressed that while a single catastrophic event could severely impact individual institutions, the global insurance industry's layered reinsurance system and capital replenishment mechanisms make overall insolvency highly unlikely.

In response to escalating geopolitical risks, the market has widely activated cancellation clauses and dynamic pricing mechanisms to strengthen systemic risk prevention. Insurers are rapidly rebalancing risk and return through significant premium increases—potentially 25% to 50% or higher—and the addition of regional exclusions.

It is anticipated that premium rates in affected areas may rise from 0.25% to 0.5% or 1% of the insured asset value.

Current insurance risk exposures in the Middle East are characterized by multiple interconnected and highly concentrated risks. An analyst pointed out that risks have spread from core shipping and energy transport channels to energy facilities, infrastructure, civilian assets, aviation hubs, and global supply chain links. Damage to civilian facilities like the Burj Al Arab, large-scale flight cancellations or diversions at regional airports, and supply chain disruptions causing business interruption losses all represent significant risk points.

The global war risk market relies on reinsurance and the International Group of P&I Clubs' mutual mechanism to achieve cross-border risk dispersion, sharing losses from a single region among global members to prevent devastating payouts for any single institution. Meanwhile, insurers have established multi-layered risk "safety valves": nuclear war exclusions, and automatic termination of coverage if war breaks out between any of the five permanent UN Security Council members.

For companies operating internationally, it is recommended that firms prioritize comprehensive marine insurance including war risk coverage, carefully review geopolitical risk exclusions in policies, and work with professional brokers to tailor coverage based on route risks—ensuring protection against conflicts, kidnap and ransom, and other specific risks. This can be complemented with political risk insurance, adjusting coverage dynamically according to regional developments.

Another perspective suggests that corporate risk management logic in the face of geopolitical conflict should shift from merely purchasing insurance to building comprehensive risk hedging portfolios. This includes moving away from standard contracts toward customized clauses explicitly covering risks like strikes, riots, and malicious damage; integrating insurance tools with non-insurance measures such as contingency plans and supply chain diversification; and recognizing that in extreme conflicts, insurance only provides financial compensation, while core resilience depends on in-depth analysis of host country political environments and pre-deployed evacuation mechanisms.

On the service front, domestic insurers are also taking action regarding personnel stranded due to the Middle East situation. For example, by March 4th, Ping An had issued 59 risk alerts, published 23 risk analysis reports, responded to 52 customer inquiries, and successfully assisted two corporate clients in evacuating safely within 24 hours. Currently, three Chinese companies have requested Middle East relocation support, for which evacuation plans are being developed.

A Ping An representative stated that prior to the recent military actions, the company had issued high-risk alerts regarding Middle East tensions as early as January 12th, proactively pushing warnings to clients in the region, conducting risk assessments, and coordinating evacuation resources to enable timely rescue services.