‘The market is behaving as it should’: Correcting the record on war risk cover in the gulf

The mechanism behind the headlines

The source of the confusion is a contractual provision called the notice of cancellation – built into every war risk policy as the mechanism by which underwriters reprice cover when the risk landscape changes materially. When hostilities escalated, P&I clubs including the American Club, Gard, Skuld, NorthStandard and the London P&I Club received such notices from their reinsurers, relating to limited circumstances in which the clubs provided war-risk coverage in  the Persian Gulf and adjacent waters, and in turn issued similar notices to their members. Typically under notice periods of between three and seven days  existing cover remains in force. After that window closes, new terms are issued at revised rates, and shipowners choose whether to reinstate.”It’s more of a rerating than a cancellation,” Ogullukian said. “From the beginning of the conflict, if an owner wanted that cover, it’s insurable. It was never a situation where it was pulled and there was no cover whatsoever.” Standard mutual P&I cover, he added, excludes war-risks as a listed peril.  War-risk cover is a separate product placed in a specialist market, re-instatable by buyback at revised terms. That product remained available throughout.