The story took hold within hours of the first strikes. When the United States and Israel launched coordinated attacks on Iranian military targets on February 28, 2026, reports spread rapidly through wire agencies and the international business press that marine war risk insurers had cancelled cover for vessels in the Persian Gulf - that the market had, at the moment of greatest need, walked away.
It was, say those closest to the market, a fundamental misreading of how marine war insurance works. And it had consequences.
"The market is responding the way it is designed to respond," said Steve Ogullukian, deputy global underwriting director and reinsurance director at the American P&I Club. "There have been conflicts in the past - obviously this is the latest high-profile one - but the way all these policies are written is meant to anticipate that there are going to be events like this, and additional premiums may need to be charged to reflect the heightened risk. There's nothing fundamentally new here other than this being a more high-profile event involving the US and Iran. We saw the same thing with Russia and Ukraine. The market's behaving as it should."
The source of the confusion is a contractual provision called the notice of cancellation - built into every war risk policy as the mechanism by which underwriters reprice cover when the risk landscape changes materially. When hostilities escalated, P&I clubs including the American Club, Gard, Skuld, NorthStandard and the London P&I Club received such notices from their reinsurers, relating to limited circumstances in which the clubs provided war-risk coverage in the Persian Gulf and adjacent waters, and in turn issued similar notices to their members. Typically under notice periods of between three and seven days existing cover remains in force. After that window closes, new terms are issued at revised rates, and shipowners choose whether to reinstate."It's more of a rerating than a cancellation," Ogullukian said. "From the beginning of the conflict, if an owner wanted that cover, it's insurable. It was never a situation where it was pulled and there was no cover whatsoever." Standard mutual P&I cover, he added, excludes war-risks as a listed peril. War-risk cover is a separate product placed in a specialist market, re-instatable by buyback at revised terms. That product remained available throughout.
The Lloyd's Market Association made these points formally in a market statement issued on March 23 - three weeks after hostilities began and with the misconception still circulating. "Three weeks since the start of the hostilities in the Middle East, we are still seeing reports that suggest insurance coverage is cancelled or unaffordable and that this is the reason that vessels are not transiting the Strait of Hormuz," it said. "This is not accurate." An LMA survey found that 88% of Lloyd's marine war market participants retained appetite to write hull war risks, and over 90% continued to offer cargo cover.
The misconception had a direct policy consequence at the highest level. In early March, the Trump administration directed the US International Development Finance Corporation to establish a $40 billion revolving political risk reinsurance facility for Gulf shipping - with Chubb named as lead underwriter and Travelers, Liberty Mutual, Berkshire Hathaway, AIG Star and CNA added to the coalition.
Ogullukian noted that Chubb had flagged difficulties with the programme in their April earnings call - among them that a condition of coverage had been US naval convoy provision through the strait, which had not materialised.
“This reinforces what we have been saying all along: There are vessels in the Persian Gulf that consider themselves to be targets, and the crews on these vessels do not want to put themselves in harm’s way,” said Ogullukian. “The naval convoy is meant to offer protection and assurance that they can safely transit the Strait of Hormuz, and the DFC programme is meant to fill this need. Without this protection, they are not going through the Strait and they are not purchasing the cover. The vessels that are going through have their war-risks coverage in place under their ordinary policies, which remain in place at higher rates.”
He was careful to distinguish where the programme might have found genuine takers: US-nexus vessels, which faced elevated targeting risk and were being quoted materially more - or assessed case by case - in the commercial market. For those owners, a government-backstopped facility might represent a meaningful rate differential. But for the broader fleet, the London market had continued to function throughout.
As Insurance Business UK reported in its analysis of how the blockade has reshaped broker practice, Howden Re data showed war risk pricing on Hormuz transits climbing from roughly 0.10%–0.125% of vessel value before the conflict to around 2%–3% by March - elevated, but available. Capacity remained in the market. The brokers it spoke to described their role as having shifted from placing cover to advising on rerouting, layered capacity and the realities of volatile insurer appetite. That is a different kind of market stress. It is not a market withdrawal.
The numbers are significant. W K Webster, the Gallagher Bassett marine claims specialist, reported that at around 3% of hull value, insuring a $100 million tanker costs roughly $3 million in war risk premium per voyage. Lloyd's List intelligence indicated quotes of between $10 million and $14 million for a VLCC with US nexus transiting the strait. Howden Re data, cited by brokers in the London market, placed pre-conflict war risk pricing on Hormuz transits at roughly 0.10%–0.125% of vessel value - a figure that had climbed to around 2%–3% by March.
Ogullukian contextualised current rates against the onset of the conflict. "I know in the beginning of the conflict some rates were going up to 5% of the vessel's value, maybe more" he said. "Hearing that something now might be at 3% to me, from the outside looking in, does not seem alarming. It is expensive, but it seems pretty much par for the course given the circumstances at the moment." The 1980s tanker war, in which Iraq attacked 283 vessels and Iran 168 over eight years, saw typical war risk rates of approximately 5%. The Black Sea immediately after Russia's invasion of Ukraine in February 2022 saw even higher indicative quotes before pricing stabilised as actual loss frequency became better understood.
"What you typically see is that notice of cancellation is issued, then new rates come out - they're traditionally high to start off because there's a big unknown there," he said. "Then as time goes on the rates may come back down because underwriters see that it is not a dire situation, just an increased risk. So you'll typically see a spike and then rates may stabilise somewhat."
Ogullukian was direct about why the notice of cancellation mechanism exists and why it makes the market function better, not worse. Without the ability to reprice mid-year, underwriters would face a binary choice: either decline to write annual war risk policies at all, or charge premiums high enough to cover a worst-case scenario that most vessel owners will never face. Neither outcome serves policyholders.
"Shipowners who buy an annual war cover policy year after year typically pay a very low rate for it," he said. But the system earns its keep precisely when it is needed most. "Owners are generally comfortable paying a low rate up front and then paying these higher rates if and when a war breaks out and their vessel's caught in the middle of it," he said. "That's how it's always been designed to work."
For practitioners - whether brokers advising clients on cover continuity, underwriters assessing aggregation risk, or claims professionals handling the growing volume of Gulf-related losses - the takeaway from those who have lived through these cycles is consistent: the London market did not fail. It repriced. The difference is not semantic. It is the difference between a market functioning under stress and a market that has stopped functioning. On the evidence of this crisis, it was the former.
Steve Ogullukian is deputy global underwriting director and reinsurance director at the American P&I Club, a member of the International Group of P&I Clubs.
