Marine Insurance Asia 2025 Panel Discussion: Wording Matters in a War
Increasing war exposure in maritime industry is driving the rates north of previous optimums, sparking a hard market and, as a result, motivating market professionals to increase existing capacities, as well as create new ones. Bloomberg estimates one billion USD (£805m) in marine war written premiums. While the market is expanding rapidly, I'd like to share my concerns that these developments may erode trust in insurance in the long run.
Evolving War Risk Wordings
Current War risk wordings change focus on the following:
Clarity
Insurers become more specific in defining "war", “warfare” or "hostilities". Previously tailored broader terms might have inadvertently covered Houthi attacks (Cl.281 or Chapter 15 NHP). Now, policies tend to add clarity or specificity, however leading to potential disagreements with assured if the situation evolves beyond the defined scope.

Named Perils
Policies tend to list specific types of attacks (e.g., mines, piracy, missiles) covered under war risk. This allows insurers to fine-tune their exposure and premiums. Again, at the expense of potential disagreements.
Geographical Exclusions
Insurers tend to exclude specific areas like the Red Sea, or even JWC entirely. This forces shipowners to purchase separate, more expensive coverage for these high-risk zones.
Cyber Warfare

State-controlled cyber attacks, although primarily considered a “cyber risk” issue, are increasingly relevant to war risk insurance. The integration of cyber warfare into war risk policies is an area insurers must address.
Challenges of Sanctions in War Cover
Yet, there is another element which is usually neglected or silenced in war cover, which is an aspect of economic warfare, namely, sanctions.
Problem
Most insurance policies, especially those with international exposure, marine ones, include clauses that allow the insurer to terminate coverage if the insured engages in sanctioned activities.
Economic Warfare

Sanctions are increasingly used as a tool of economic warfare, often preceding or even substituting traditional military action. This creates a complex situation where businesses operating in a region may suddenly find themselves in violation of sanctions due to no actual fault of their own.
Liability Coverage Gaps
If a liability policy is terminated due to sanctions, the assured is left exposed to potential claims arising from their operations in the sanctioned territory.
Even if the assured has conducted the most thorough pre-emptive risk assessment, the assured may face a situation when the third-party who otherwise would have been a liability policy beneficiary, became sanctioned while risk mitigation was ongoing.
Imagine an assured call to a Russian port in 2021, where a casualty, such as an oil spill, happened. Claim adjustment process may easily take a year, and by the time the claim is assessed, the beneficiary is on the sanctions list. The insurer is now in a stalemate, as they cannot legally pay the claim due to sanctions but are contractually obligated to do so.
This is a tricky situation highlighting the dynamic nature of sanctions and their potential impact on insurance claims. Even with the assured doing everything right, the delayed sanctions on the third party create a complex problem.
The Problem of Sanctions Compliance
Insurers are legally obligated to comply with sanctions regulations. This means they cannot make payments to a sanctioned entity, even if that entity is the beneficiary of a legitimate insurance claim.
Contractual Obligations
Insurers also have a contractual obligation to the assureds to handle and pay valid claims.
Resulting Conflicting Obligations
The sanctions and the insurance contract create conflicting obligations for the insurer, leaving them in a difficult position.
Potential Courses of Action
Legal Guidance
Insurers need to seek immediate legal counsel specializing in sanctions law to understand the specific restrictions and explore any potential exemptions or licenses that might allow the payment.
Transparency with the Assured
Insurers must maintain open communication with the assureds, explaining the situation and the potential delays caused by sanctions.
Negotiation with Authorities
Insurers should attempt to negotiate with the relevant sanctions authorities to explore options for making the payment without violating sanctions, in example through a special license.
Alternative Solutions
Escrow Account
Insurers can potentially deposit the claim payment into an escrow account held by a neutral third party until the sanctions are lifted or a solution is found.
Assignment of Claim
With the assureds’ agreement, insurers could explore assigning the claim payment to a non-sanctioned entity, if legally permissible.
Policy Buy-Back
An extreme solution, which is not always on the surface - insurers might offer to buy back the policy from the assureds for a negotiated amount, effectively terminating their obligations.
Assureds’ Cooperation
Assureds’ cooperation and understanding will be crucial in finding a solution that balances the interests of all parties involved.
Mitigating Future Risks by Due Diligence
Enhance due diligence processes to include ongoing sanctions screening of third parties involved in claims, not just at the policy inception.
Conclusion
The maritime insurance industry faces unprecedented challenges, from evolving war risks to sanctions compliance. By fostering transparency, finding innovative solutions, and prioritizing collaboration, we can ensure the industry’s growth while safeguarding the interests of assureds. The bigger the issue, the more crucial it is for those involved to keep talking. Ultimately, even wars end through dialogue and compromise, so why not choose that path from the start? Cooperation is the only way to pave the road with claims handling in this sphere.