Rising Geopolitical Tensions Drive Demand for Marine War Risk Insurance in India

Geopolitical instability in key corridors like the Red Sea and the Strait of Hormuz is transforming marine war risk insurance from a niche add-on into a strategic necessity for the shipping industry. As man-made disruptions such as drone strikes and naval standoffs replace traditional weather risks as primary concerns, shipowners and cargo owners face volatile premiums and shifting trade routes. For India, which relies on sea lanes for the vast majority of its trade volume, these developments are prompting a more proactive approach to risk management and domestic underwriting.

The global shipping industry is experiencing a fundamental shift in risk management as geopolitical tensions in the Strait of Hormuz, the Red Sea, and Eastern Europe drive a surge in demand for marine war risk insurance. Unlike standard marine policies that cover storms or mechanical failures, war risk insurance addresses extreme scenarios including terrorism, naval standoffs, and targeted drone or missile attacks. These man-made disruptions have become a primary concern for the sector, as even the threat of escalation can cause premiums to spike overnight. For India, the stakes are particularly high given that nearly 20% of the world’s oil passes through the Strait of Hormuz and over 95% of the country’s trade by volume is transported via sea.

The practical implications of these rising risks are evident in the Red Sea, where many vessels have opted to bypass the region entirely in favor of the longer route around the Cape of Good Hope. This diversion significantly increases fuel costs and transit times, putting pressure on Indian exporters in sectors such as engineering goods, textiles, and pharmaceuticals through delayed deliveries and shrinking margins. Furthermore, war risk premiums are uniquely volatile, often set on a per-voyage basis rather than annually, relying on real-time security alerts and political developments. This unpredictability forces charterers and shipowners to incorporate insurance as a core component of their cost structures rather than a routine administrative expense.

To mitigate these vulnerabilities and protect national energy security, the Government of India has introduced the Bharat Maritime Insurance Pool (BMIP). This initiative is supported by a substantial INR 12,980 crore (approximately USD 1.5 billion) sovereign guarantee designed to absorb catastrophic claims and provide seamless domestic underwriting for marine hull, machinery, cargo, and specialized war risks. By establishing this pool, India aims to ensure that its vessels can maintain operations in high-risk corridors despite potential coverage cancellations by global underwriters. Additionally, the industry is increasingly focusing on the human element, as war risk cover also extends to crew protection, providing essential compensation and support for seafarers navigating high-stress, high-risk environments.