War insurance may attract more funds despite heightened risk, says underwriter

THE appetite for insurance that provides cover against damage resulting from acts of war or terrorism could grow bigger amid rising geopolitical tensions because people see money to be made in this insurance segment, an experienced underwriter has said.

But Chris Lambe, a senior underwriter at Gard, said insurance brokers might have difficulty picking the right insurer for “war insurance” because of a mushrooming of choices in this insurance segment. Gard says it insures around half the global merchant fleet.

Speaking on Thursday (Apr 18) at a panel discussion at the Marine Insurance Asia conference held as part of Singapore Maritime Week, he was answering a question on whether the war insurance sector would diminish following the sinking of bulk carrier Rubymar, which was attacked by Yemen’s Houthi rebels in the Red Sea in February.

Lambe said: “It’s an interesting paradox, because I think the opposite will happen. Where insurance rates go up, more money flows into that part of the insurance market from external sources, as people see money to be made.”

He thus believes that the capacity for war protection is not going to be under pressure, “because at the moment, it’s the place where people are typically making quite significant commercial gains”. War has historically made a decent return, he added.

Brokers might thus find it hard to choose a competent insurer – one that can step up to help a shipowner in trouble in the critical first 24 to 48 hours of an attack. 

“A lot of guys will pile into the market, trying to make a quick buck. Brokers need to be aware of which the right ones are, which aren’t,” he said.

The maritime sector has lately come under heightened risks, with both the Black Sea and the Red Sea being near the Russia-Ukraine and Israel-Hamas war zones.

The Houthi militants have been launching missile and drone attacks on merchant vessels in the Red Sea since last November, in moves that they claim to be in support of the Palestinians in the Israel-Hamas war. As a result of these attacks, cargo vessels have re-routed to sail around South Africa, instead of through the Red Sea, the shortest Asia-Europe trade lane.

Last week, Iran seized a vessel chartered by leading container-ship operator Mediterranean Shipping Company in what appeared to be an escalation of tension in the Middle East.