Lloyd's of London insurers are attempting to harden the legal definition of war at precisely the moment geopolitical conflict is becoming harder to categorise. The Lloyd's Market Association is reviewing the Five Powers exclusion - a marine clause dating to the years after 1945 that cancels cover if war breaks out between the US, UK, France, China or Russia - because the binary it assumes is no longer the binary the world is operating in. Great-power confrontation increasingly plays out through proxies, drones and sabotage rather than declared hostilities, and the clause provides no guidance on where the threshold lies.
The market has already seen what definitional ambiguity costs. Merck fought insurers for years over a war exclusion following the 2017 NotPetya cyberattack, linked by US authorities to Russia's military. A New Jersey appeals court ruled the exclusion required actual military action rather than merely a state actor's hostile intent. The case settled confidentially in 2024 for a reported $1.4 billion. When aviation insurers faced losses on aircraft stranded in Russia following the 2022 invasion of Ukraine, similar definitional questions about what constituted a war-related loss arose across multiple jurisdictions simultaneously. The industry's exposure to ambiguity is not theoretical.
The marine market already has a functioning approach to grey-zone hostility short of declared war. Houthi attacks on Red Sea shipping - not war between any of the five powers - prompted the Joint War Committee, the same LMA body now weighing the new clause, to designate the Bab-el-Mandeb Strait a listed area requiring additional premiums rather than a blanket exclusion. War risk rates rose roughly 100-fold at the peak of the 2023-24 attacks.
That model faces a fresh test. Houthi forces declared a renewed blockade on Israeli-linked shipping after February's Iran conflict, and BIMCO warned that premiums - already running 20 times their pre-crisis baseline - would climb further, with some vessels unable to find cover at any price. The listed-area approach works for grey-zone risk between lesser powers.
It offers no template for hostility involving the five powers themselves, where the stakes and the definitional stakes are both higher.
Draft wordings shared with the Financial Times give the definitional effort concrete shape. The drafts list scenarios that would not, on their own, trigger the exclusion - including cyberattacks, drone incursions and undersea sabotage. A Chinese drone entering US airspace would not automatically cancel cover unless weapons were fired; a covert Russian submarine sabotage in UK waters would face the same threshold, unless it produced casualties equivalent to those sustained in an armed attack. The drafts represent an attempt to map the spectrum between peacetime friction and war in language that can be applied by underwriters and interpreted by courts.
"We're dangerously close to having an incident that involves two of the five powers," Marcus Baker, a marine insurance broker, told the Financial Times, adding that the market needs "a bit more clarity over what is something big and nasty and what isn't something big and nasty." The LMA is weighing an independent panel to rule on whether a conflict counts as war for insurance purposes. LMA legal director Arabella Ramage said the body wants "greater clarification," adding that "the need for the Five Powers clause is as valid now as when it was first introduced."
The push comes at an awkward point in the market. London market net underwriting results fell 14% to £4.8 billion in 2024, down from £5.5 billion in 2023, and property rates dropped roughly 9% through the first half of 2025, according to Oxbow Partners data. Softening markets have historically encouraged broader coverage terms and fewer exclusions as insurers compete for business - the opposite commercial impulse to what the LMA is attempting. The definitional tightening effort is running against the cycle, which raises questions about how widely any new wording would actually be adopted even if published.
The LMA has not decided whether to publish the clause - insurers could adopt it or not. Past LMA wordings, including its sanctions clause, have shaped market practice well beyond Lloyd's, suggesting adoption could be broad if the wording achieves consensus. But legal enforceability beyond the London market remains an open question. "In a US court, a London panel's determination that [an act] simply wasn't an act of war might be worthless," said Marty Myers, a lawyer at Covington. Afolabi Tayo, a lawyer at Clyde & Co, said clarity "is really helpful" - but the NotPetya litigation, fought and eventually settled in New Jersey rather than London, is a reminder of where the real jurisdictional battles tend to occur.
