For most of the past two centuries, the marine war risk market has operated on a relatively settled understanding of what a war is. Ships are struck, cargo is lost, underwriters pay - or, in peacetime, they collect modest premiums and wait. The mechanism is old and, within its limits, well understood.
The Strait of Hormuz crisis has introduced a complication that the mechanism was not designed to handle: a conflict in which the largest military power involved has no formal declaration of war, in which the language of official statements is carefully chosen to avoid triggering certain legal thresholds, and in which the gap between what is happening on the water and what governments are willing to say is happening on the water may determine the outcome of thousands of insurance claims.
"Different governments' positions are what insurers and policyholders take into account," said Mahmoud Abuwasel, an international disputes partner at Wasel & Wasel. "We colloquially talk about it as a war, but from the United States' official position, it's not a war. That distinction matters because it directly affects whether war-risk provisions in insurance policies are triggered."
Abuwasel's warning is not hypothetical. During the Yugoslav conflict of the 1990s, insurers successfully argued before arbitration panels that a limited armed conflict - one in which NATO powers had not formally declared war - did not trigger war exclusion clauses in commercial policies. The policyholders lost. The insurers' position, upheld at arbitration, was that the absence of a formal declaration was legally material, regardless of the scale or nature of the fighting.
The parallel is uncomfortable. The United States has not declared war on Iran. Its strikes on Iranian military targets on 28 February 2026 were framed as defensive operations. Iran's retaliatory attacks on commercial shipping, US bases and Gulf infrastructure were described in Washington as acts of aggression requiring response, not as the opening salvoes of a formally constituted war. The language has been consistent and, from a legal standpoint, deliberate.
For policyholders whose losses fall into the gap between standard war exclusions and the coverage they believed they held, the definitional question is not philosophical. As Insurance Business UK's analysis of the conflict's hidden insurance crisis noted, legal analysis from Mills & Reeve found that many insureds in the Gulf had purchased only terrorism or lower-level civil unrest coverage, leaving them potentially uninsured for losses arising directly from the conflict. Political violence policies designed to fill the gap left by standard property war exclusions do not necessarily dovetail cleanly with war risk exclusions - and it is in that gap that the disputes will be fought.
Steve Ogullukian, deputy global underwriting director and reinsurance director at the American P&I Club, offered a practitioner's view of how the boundary operates in the P&I context - and where it becomes ambiguous even under standard policy language.
P&I clubs exclude war risk from standard mutual cover as a listed peril. In the clearest cases - a vessel struck by a missile in an active war zone - the exclusion applies, and owners must look to their separate war risk tower for cover. Ogullukian acknowledged, however, that certain downstream liabilities are harder to draw clean lines around. Where the proximate cause of a loss is a war peril, the consequences - oil escaping into international waters, for instance - may still potentially create environmental liabilities that clubs cannot simply disclaim. “Most war risk policies have a limit equal to a vessel’s value, and this may not be adequate for some of the larger third-party liability claims that P&I clubs are accustomed to seeing. P&I clubs fill this gap by offering a layer of coverage above a vessel’s insured value. Therefore, large maritime casualties where you may have environmental damage, wreck removal, etc., may still find their way back to a P&I club and their reinsurers,” he said.
A separate insurable interest problem arises with what Ogullukian called opportunistic owners - those who knowingly transited the strait during active hostilities specifically to profit from the absence of other operators. "We heard that there were some opportunistic owners looking to go into the Gulf knowing nobody else wanted to," he said. The implications for coverage are direct: "It's not a fortuity at that point. It's not bad luck. You're knowingly throwing yourself into a dangerous area to make a few bucks." War-risk underwriters, he said, may charge those owners materially more or decline to insure them at all.
The involvement of state-backed reinsurance - through the US DFC's $40 billion facility, the Trump administration's offer to backstop cover under the Terrorism Risk Insurance Act, and the UK government's confirmation that US defensive operations using British bases include degrading missile capabilities used against shipping - introduces another legal dimension that claims professionals should be tracking.
Abuwasel warned of a dynamic that echoes the business interruption disputes of the COVID-19 pandemic. During that period, courts in the US and UK required policyholders to account for government relief schemes - the Paycheck Protection Program in the US, furlough in the UK - before quantifying insured losses. A similar dynamic, he suggested, could emerge in Gulf-related disputes, particularly where losses intersect with sectors covered by government support. If a shipowner has access to DFC-backed reinsurance, an insurer arguing that primary cover should be reduced accordingly would be operating in territory that the courts have, in recent years, shown some willingness to entertain.
For multinational corporations with complex, multi-line risk programmes, the causation problem is equally acute. Legal analysis from Pillsbury Law, cited by Insurance Business UK, characterized the issue plainly: losses from physical damage, denial of access, seizure and detention, sanctions exposure and pure delay each require different policy responses, and many policyholders have yet to map their actual disruptions to the relevant coverage categories - let alone identify the gaps. In a fluid geopolitical environment, establishing the direct causal link between a triggering event and a financial loss is becoming harder, not easier.
The accumulation of ambiguity - definitional, causal, governmental - means that the claims phase of this crisis is likely to be long and contentious. Several fault lines are already visible.
Business interruption cover will be tested hard. When Maersk suspended Hormuz transits on March 1 and began rerouting vessels around the Cape of Good Hope, the additional cost per ship was approximately $1 million in fuel, plus additional voyage time. Standard BI triggers require physical damage to an insured asset; most rerouting costs will not qualify. The policyholders who discover this gap tend to discover it at the claims stage.
Trade credit insurers face an analogous problem. As Insurance Business UK reported, the Hormuz closure is testing a line that had absorbed the Red Sea disruptions and the Russia-Ukraine commodity shocks without systemic stress - but the scale here is different. The strait carries approximately 20% of global oil flows. Delayed or missed payments in Gulf-dependent trade flows, particularly where war and political risk exclusions limit the scope of traditional covers, will generate disputes that the trade credit market has not fully priced.
And for the vessel owners and their brokers, the most immediate practical question is whether stationary ships create new legal vulnerabilities. Abuwasel noted that vessels docked for extended periods become susceptible to creditor claims and court-ordered seizure in a way that transiting vessels are not. "If a vessel is docked for an extended period, creditors have an opportunity to seek court orders to seize it," he said. "This risk didn't exist in the same way before, but now it's becoming more prominent."
The war, whatever governments choose to call it, is generating a claims environment of considerable complexity. Insurance professionals who understand the definitional fault line at its centre will be better placed than those who do not.
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. Mahmoud Abuwasel is an international disputes partner at Wasel & Wasel.
