The Strait of Hormuz crisis is exposing potential vulnerabilities in the war risk insurance market. 

The clause issue

The marine war insurance industry is predominantly reliant on clauses that were not specifically constructed for modern war. The Institute War and Strikes Clauses for hull insurance date from 1983. Because war risk cover is so rarely called on in practice, these wordings have largely gone unused and untested. The Hormuz conflict is now causing many of these provisions to be stress-tested.  

Where insurers are most exposed

Three areas present particular challenges for insurers right now.

1. First, the rise of drone and cyber operations has blurred the boundary between war risk and cyber risk. GPS jamming and AIS spoofing could potentially trigger cyber exclusions within war risk policies, leaving insurers and policyholders locked in disputes over which policy responds and whether any cover applies at all.
2. Second, constructive total loss provisions. These clauses are designed to cover circumstances in which a vessel has been detained for a long period (which can result in a deemed constructive total loss after 12 months). However, a recent and temporary ceasefire raises the question for insures as to whether the 12-month clock is reset. 
3. Finally, the Five Powers clause. This clause terminates cover should war break out between five permanent UN Security Council members. With proxy warfare now a central feature of modern conflict, insurers face uncertainty as to whether indirect involvement by a major power could trigger the clause, potentially impacting cover across entire fleets.

Rising premiums 

Premiums have reached prohibitive levels in some cases, with insurers applying broad geographical exclusions and removing entire regions from standard hull cover. The Joint War Committee's March 2026 expansion of designated high-risk areas has increased the volume of voyages requiring additional cover, compounding the pressure on both sides of the market.

Yet even as premiums rise, war risk premium pools may reduce. When vessels reroute away from high-risk corridors such as the Red Sea or the Strait of Hormuz, fewer policies are taken out along those original routes and premium income collected along those corridors may fall but the risk still remains. Insurers are potentially left with less incoming premium whilst continuing to cover those ships that are most exposed.

Next steps for insurers

Insurers may want to review their long-standing war risk policies and update them to align with this type of modern warfare.