In a letter to insurers on Sunday, GIC Re said that it would cease to provide Marine Hull War Risk insurance coverage for vessels operating in designated high-risk zones: Reports
MUMBAI: Amid escalation of conflict in the Middle East, state owned reinsurer General Insurance Corporation of India (GIC Re) has decided to withdraw marine hull war risk cover in several high-risk global regions effective March 3. Industry executives told DC, that the reinsurers including GIC Re are also considering withdrawing marine cargo and aviation cover for these regions.
In a letter to insurers on Sunday, GIC Re said that it would cease to provide Marine Hull War Risk insurance coverage for vessels operating in designated high-risk zones.
These areas include parts of the Persian or Arabian Gulf and adjoining waters, the Gulf of Oman, certain regions around the Black Sea and Sea of Azov, waters linked to Russia, Ukraine and Belarus, as well as select stretches of the Red Sea, Gulf of Aden and Indian Ocean.
The Persian Gulf and the Red Sea–Suez Canal corridor have already been designated as high-risk zones for the past three years. Insurers have therefore been charging additional war risk premiums for cargo transiting through these waters.
Marine hull cover is specifically meant to provide coverage for ships, vessels and their machinery.
Gaurav Agarwal, Vice President, Marine Insurance, Prudent Insurance Brokers said, “Historically, marine war premiums react immediately to heightened hostilities, especially in strategically critical trade corridors such as the Persian Gulf and the Red Sea route via the Suez Canal.
At this stage, stakeholders across the shipping and logistics ecosystem are closely monitoring developments. Any sustained escalation could translate into higher freight costs, extended transit routes, and increased insurance outlays for exporters and importers.”
It has been reported that the Strait of Hormuz, a critical artery for global energy trade, accounting for around 20 per cent of global crude oil flows and 30 per cent of LNG trade has been closed for shipping by Iran. The airspace and airports have already been closed with airlines
cancelling flights. Added to this Houthis of Yemen have pledged to
resume attacking vessels transiting the Red Sea.
Hari Radhakrishnan, an insurance expert said, “The heightened geopolitical risk in the Middle East with both major shipping lines affected will likely result in war risk cover being completely
withdrawn. The war cover for new risks would be either unavailable and even if available would be extremely expensive. This can mean that the cost of shipping will go up considerably.”
“For India, which is heavily dependent on oil imports from the Gulf this can have a serious economic impact. Similarly for aviation insurance, the war risk coverage will become expensive or unavailable
for affected countries. The wider economic impact such as inflation and supply chain disruptions can also adversely impact claim costs,” added Radhakrishnan.
