A growing number of marine insurers have withdrawn coverage for vessels linked to the U.S., U.K., or Israel operating in Middle Eastern waters, as geopolitical instability drives war risk pricing to new highs.
The shift signals a sharp deterioration in market sentiment, with carriers increasingly unwilling to underwrite ships perceived to be connected to Western governments. Insurers are not only pricing aggressively—they are declining business outright.
“We’re seeing a firm refusal to insure ships connected to the U.S., U.K., or Israel—price is no longer a factor,” said David Osler, insurance editor at Lloyd’s List, in an interview with CNBC.
Among the few carriers still writing war risk in the region, premiums have more than tripled. According to Marsh McLennan, current pricing ranges from 0.25% to 0.45% of ship value—up from 0.125% earlier this spring. Following U.S. strikes on Iranian nuclear sites, premiums spiked further, with some underwriters quoting rates at 0.5% or more for American-affiliated vessels.
With container ships and tankers often valued at $100 million or more, those increases pose substantial cost implications. Although still well below the 5% seen during the height of the Ukraine conflict, the trend points to a hardening market.
War risk underwriters have also halved the required notice period for coverage declarations—from 48 to 24 hours—as the situation on the ground remains highly fluid.
“The ability to obtain coverage remains, but pricing and terms are shifting by the hour,” said Marcus Baker, global head of marine, cargo and logistics at Marsh. “The compressed timeline for declarations is unprecedented in my career.”
This tightening of terms reflects not only pricing discipline but growing unease among reinsurers, brokers and shipowners navigating what many see as an unpredictable threat environment.
The industry’s retreat is also a response to rising strategic risks, particularly around the Strait of Hormuz—a vital shipping lane for nearly 20% of the world’s oil. Any disruption to this route could ripple through global energy markets, affecting exports to major consumers like China and India.
“China’s continued appetite for Iranian crude has, to some extent, kept demand for war coverage high,” Osler said. “But should that dynamic shift, pricing pressure may ease.”
A tentative ceasefire has done little to stabilize sentiment. “The marketplace is essentially in a holding pattern,” Osler said. “Owners are hesitating to commit to new voyages in the region.”
Despite the ongoing conflict, the Joint War Committee of Lloyd’s of London has not updated its list of designated high-risk areas. While underwriters are still permitted to apply additional premiums in these regions, no new mandates have been issued.
Security consultancy Ambrey, in a circular published Tuesday, warned of a “realistic possibility” that hostilities between Israel and Iran could resume. Although the threat of direct U.S. involvement was viewed as having decreased, insurers were reminded that ships transiting the region must still provide prior notification.
While recent price hikes have captured industry attention, they remain far lower than those seen in other war zones.
“We’ve seen war risk rates hit 5% in Ukraine,” Baker said. “That’s an order of magnitude higher. But the underlying risks, cargo values, and strategic implications vary dramatically.”
Even a small increase in premiums for oil or LNG shipments can lead to sharp financial consequences, Baker noted. “The risk calculus is different across commodities, and underwriters are adjusting accordingly.”
The outlook for war risk coverage in the Middle East remains uncertain. While insurance is still technically available, the terms are tightening and confidence is wavering.
“There’s no clear direction right now,” Osler said. “The mood in the market is best described as anxious—and fluid.”
