The effects of geopolitical conflicts on insurance coverage within the maritime industry and global logistics chains were discussed during the webinar “Maritime Insurance in Times of War,” organized by the Chilean Insurance School. The event brought together specialists from the maritime insurance sector to analyze how war clauses operate, their implications for shipowners, exporters, and importers, and the impact current global scenarios are having on international trade.

Opening the presentations, Arnaldo Rotella, Marine & Transportation Director at Crawford Latin America, explained that war coverages are part of an insurance system that historically has had to adapt to war scenarios and periods of high uncertainty. “Worldwide, during the last two years, the war clause has been invoked more than 50 times,” he noted, adding that although these mechanisms are less familiar in Latin America, they are commonly used in other regions.

He also pointed out that traditional marine cargo insurance policies operate under an “all risks” scheme, although war-related events are initially excluded and later reincorporated through additional clauses. According to his explanation, these coverages contemplate not only declared wars, but also hostile acts, civil wars, rebellions, insurrections, as well as capture and seizure situations. “Any hostile act between two parties is enough for this clause to begin operating,” he stated.

The executive further detailed that these coverages have specific territorial and temporal limitations. Unlike a conventional “warehouse-to-warehouse” policy, the war risk extension mainly covers the maritime leg from the moment the cargo is loaded onto the vessel until its arrival at the destination port.

Another aspect discussed was the cancellation mechanism associated with these coverage clauses. According to Rotella, insurers have the authority to terminate coverage by providing seven days’ notice. However, he clarified that cargo already in transit at the time of notification remains covered, with an additional seven-day period granted to remove or move the goods out of the conflict-affected area.

Regarding the effects of this scenario on Latin America, the specialist stated that international conflicts are reshaping trade routes, causing changes in suppliers, price increases, and port congestion. He added that this situation requires stronger coordination between commercial and logistics areas in order to avoid delivery disruptions and exposure to losses.

Hull insurance

From the perspective of marine hull insurance, Fernando Arroyo, Marine Hull, Aviation and Aquaculture Manager at Crawford Chile, explained that war clauses operate as additional coverages subject to specific conditions depending on the type of vessel, route, and operational area.

He particularly addressed the impact generated by escalating tensions in the Middle East and the restrictions imposed around the Strait of Hormuz. According to his presentation, the London marine insurance market activated policy cancellations and reclassifications following the rise in risks within the area. “The market began treating the transit not as a single zone, but as three different risk segments,” he explained. He also noted that war risk premiums experienced significant increases: “In some cases, by more than one thousand percent,” he specified.

The executive added that these clauses contemplate not only direct physical damage to vessels, but also situations involving capture, seizure, or prolonged deprivation of the ship’s use. In some cases, he explained, prolonged detention may constitute a constructive total loss and lead to indemnification.

Protection and Indemnity

Meanwhile, Marcela Pizarro, Associate Director at Britannia P&I Club, addressed the operation of Protection and Indemnity (P&I) insurance, which is designed to cover shipowners’ legal or contractual liabilities toward third parties.

The executive stated that “when a war situation exists, these standard coverages are put to the test.” In that regard, she explained that P&I insurance generally excludes damages directly arising from acts of war, such as missiles, drones, mines, or cyberattacks linked to hostilities. However, she clarified that additional coverages are available through the International Group of P&I Clubs.

In addition, the specialist specified that a vessel operating in a conflict zone does not automatically lose its insurance coverage, for example if a ship suffers a mechanical failure or a fire unrelated to hostilities. In that sense, she explained that exclusions are generally triggered when the damage suffered by the vessel or cargo is directly linked to war-related events or war risks contemplated in specific policy clauses.

David Otero, Marine and Casualty Leader at HDI Seguros Chile, analyzed the impact of the conflict in the Persian Gulf on marine insurance underwriting and on coverage decisions adopted by insurers and reinsurers. He recalled that modern war clauses originated in the Lloyd’s of London market and have evolved through major international conflicts and maritime crises.

Regarding the current situation, he indicated that Lloyd’s issued massive notices of coverage cancellations and that maritime traffic through the Strait of Hormuz experienced a significant decline. “The practical effect was almost a naval blockade,” he stated.

The executive also detailed the sharp premium increases for vessels operating or transiting through conflict zones. According to him, in some cases rates rose from approximately 0.25% to levels exceeding 3%, implying multimillion-dollar costs for shipowners and operators.

Concerning Latin America, Otero noted that the region faces indirect impacts related to rising logistics costs, higher energy prices, and coverage restrictions. He added that insurers have had to review their existing coverages in order to determine actual exposure to conflict zones and define potential cancellations or policy adjustments. “The war cancellation notice is a risk management instrument and should not become a commercial adjustment mechanism,” he affirmed.

Overall, the speakers agreed that although Latin America is not directly involved in the current conflicts, the interdependence of global trade and the importance of international maritime routes mean that the effects on insurance, logistics, and transportation costs have direct consequences for exporters, importers, and operators throughout the region.

By MundoMaritimo