As confusion continued over the potential for renewed peace talks between the USA and Iran as the agreed ceasefire was set to end risk leaders have told businesses they need to plan for the worst.

Risk analytics group Russell hosted an online seminar which found there are growing concerns for business leaders around unquantified risk accumulation caused by the war and is impacting underwriting portfolios, according to attendees at a Russell webinar.

During the webinar, attendees which included representatives from corporates and (re)insurers, were asked a series of questions around their approach to the risks the conflict has created.

In all 73% agreed with the statement: “would you agree that the war has highlighted key unquantified areas of risk accumulation such as ports & airports”.

55% said they were “somewhat concerned” about the impact of the Iran War on their underwriting portfolio. Unsurprisingly 88% of respondents confirmed that they are monitoring geopolitical volatility.

Chris Don, head of communications & external affairs, at Russell said: “The results of our polls highlight the increasing concern about the geopolitical ramifications of the US and Iran War on insurance markets across the world. The war is creating uncertainty, which is certainly going to have a negative impact on the global economy in the short term, but not necessarily for insurance markets.

“Different underwriters have different risk appetites, but what they increasingly share is a thirst for business intelligence as it relates to geopolitical events such as Iran. Such intelligence can make the difference when returning underwriting results across portfolios that deliver a superior return on equity to investors.”

The poll came as shipowners and brokers were warned to take greater consideration of the scope of their war risk cover, and not just the price, as the number of war risk claims following incidents outside of traditional high-risk areas has risen.

Ben McKeith, senior underwriter at the London P&I Club, has advised that not enough owners are considering their long-term war risk cover plans as part of their risk management strategy. He noted that owners are often more conscious of the scope of their cover during periods of geopolitical instability, most recently seen following the escalation of tensions in the Middle East Gulf, and that war risk cover needs to be treated more seriously and assessed more regularly.

“Until recently, owners have not had good reason to consider the scope of their war cover and therefore it is treated as an afterthought until it is time to renew. The recent developments in the Middle East have once again put a spotlight on why continuously assessing your war risk cover needs is so important for owners and brokers,” McKeith explained.

His warning comes after, not only the escalation of tension involving Iran but at least half a dozen war risk claims that have been filed in the last 12 months following attacks on vessels outside of traditional high-risk areas, despite being linked to the ongoing Russia-Ukraine conflict.

“We have seen incidents of limpet mines being attached to vessels that then explode outside of the Black Sea, most notably off the coast of Turkey, in the Mediterranean, off the coast of North Libya and off the west coast of Africa,” he continued. “For some, that might mean there is a different insurer for the claim to the one that provided breach cover for the voyage within the Black Sea so it is essential that the scope of both covers are considered closely and that they dovetail to ensure that there is no risk of gaps in cover.”

McKeith said while many shipowners know they are not trading in areas that would likely need additional breach war risk cover, the growing number of losses occurring outside of a high-risk area are another example of the emergence of new threats that put a focus on ensuring that they have the right war risk cover in place.

“Some owners are choosing to have limited war risk cover because they know they’re not trading in traditional high-risk areas,” he cautioned. “For example, in the Black Sea, some are thinking that they can skirt defined high-risk areas to avoid incident. However, floating mines, drones and underwater divers could still target your vessel regardless of cargo or destination.

“We are seeing a similar story play out in the Middle East as geopolitical challenges continue to limit access to the Strait of Hormuz. Some shipowners know they aren’t entering a high-risk area like the Black Sea or Middle East Gulf, so they don’t scrutinise their war risk cover. However, the emergence of new risks means that we are urging owners and brokers to take a closer look at their war risk cover and ensure they have adequate cover in place.

“That is the whole point of marine insurance. It is a check against the unexpected.”

McKeith added that, while owners and brokers are rightfully asking questions about their exposure and war risk cover today, they need to be asking those same questions when it comes to renewing their cover, which could be at a much later date, regardless of the status of the conflicts in the Middle East and the Black Sea.

“Shipowners and brokers need to ask themselves today what they actually have in their war risk cover. For many, the answer is just a standard policy that they tick off as part of their annual insurance premiums,” He concluded. “However, the ongoing geopolitical issues in the Middle East Gulf means that it is unlikely that we will see a return to low premiums for war risk cover any time soon. So, while it might still be a while off until owners need to renew that cover, they need to start considering today how adequate their war risk cover needs to be for next year, particularly as vessels face greater exposure outside of traditional high-risk areas.”

“The results of our polls highlight the increasing concern about the geopolitical ramifications of the US and Iran War on insurance markets across the world. The war is creating uncertainty, which is certainly going to have a negative impact on the global economy in the short term, but not necessarily for insurance markets.

Chris Don, Russell