Insurance companies that provide specialized maritime war coverage are canceling policies and preparing to increase rates as the risk of ships being destroyed or hijacked rises with the war in Iran expanding to the broader Middle East.
The reaction by insurers highlights the unique way that companies that handle risk stemming from military conflicts adapt to the highly volatile market of war coverage.
Insurance for war-related damage resembles flood insurance in the U.S. — both are excluded from standard property coverage because of the unpredictable nature of the risk, and are purchased as separate policies or riders.
War policies include built-in protections for insurers from massive losses due to military strikes, terrorism or piracy. Policies generally include a seven-day cancellation notice that lets either party end coverage if the risk changes, the analytical firm Morningstar DBRS said in a report Monday.
