War risk premium
A separate insurance charge paid by a ship entering a sea area declared high-risk, on top of its normal hull cover, for war and attack risks.
How it works
Standard hull and machinery insurance usually excludes risks such as war, terrorism, piracy and seizure. These risks are covered by separate war insurance. When a ship enters a high-risk area, the insurer asks for an extra premium for that voyage; the market calls this the additional war risk premium.
In the London market, high-risk areas are designated by the Joint War Committee. The committee is made up of representatives of Lloyd's syndicates and the IUA company market who write marine war insurance. Together with an independent security adviser, it publishes the Listed Areas. A ship entering these areas must notify its insurer.
The measurement trap is that the premium has no single official price. The committee only designates the area; the price is negotiated ship by ship between insurer and broker. Rates quoted in the press are therefore compiled from individual deals, expressed as a share of the ship's value and valid per voyage. When different sources give different rates, it is usually not an error but a different ship and date.
Why it matters here
The insurance market tells us whether a sea lane has really closed before the headlines do. A route does not close until the premium becomes unbearable; the premium feeds into freight, and freight into the price of imported energy and goods. In Hormuz, the Red Sea and the Black Sea, we read transit counts together with this premium. If the premium is not falling while transits rise, shipowners still see the risk as expensive.