When the Cover Disappears: War Risk and Gulf Project Cargo

TL;DR

On 2 March 2026 the International Group of P&I Clubs — the mutual pool covering roughly 90 percent of the world's ocean-going tonnage — issued 72-hour cancellation notices on Gulf war risk cover. By 5 March the cover was gone, and more than 150 tankers sat outside the Strait of Hormuz waiting for insurance that no longer existed at any price. Note the distinction, because everything follows from it. A market that reprices risk at three, five, ten times the old rate is still a market. Expensive, unpleasant, transactable. A market that withdraws is not a pricing problem at all. It is a berth problem. A vessel without valid war risk cover does not sail, cannot be financed, and under most charterparties hands the owner a contractual right to decline the voyage and bill you for the inconvenience. Howden Re published a Strait of Hormuz assessment in late March, and by April the World Economic Forum was putting it as plainly as these things get put: Middle East conflict is turning governments into insurers of last resort. The part Gulf importers have been slowest to price is that breakbulk and heavy-lift project cargo is more exposed than tankers or container liners, not less. Heavy-lift is a thin market of specialised hulls carrying enormous concentrated value, sitting alongside for days rather than hours during load-out, moving on charterparties rather than liner schedules. When underwriting capacity contracts, it contracts first around whatever is hardest to spread — and a single vessel carrying eighty million dollars of gantry cranes into Jebel Ali is a textbook example. If you have machinery on the water or on order into the Gulf this quarter, the exposure buried in your contract is not the freight rate. It is whether the voyage happens at all, and whose problem it becomes when it does not.

Deep Dive

Start with a structural fact that most coverage skates past: P&I clubs are mutuals, not commercial insurers. The members are shipowners collectively carrying each other's liabilities, and the arrangement works because risk is spread across thousands of hulls in hundreds of trades. Regional conflict risk does not spread. Every member transiting the same chokepoint on the same morning is exposed to the same event, which is the textbook definition of correlated loss and the one thing a mutual handles badly.

So the 72-hour cancellation notice was not a failure of nerve. It was a contractual right, written into the cover years ago by people who anticipated exactly this, so the pool could shed a correlated exposure before it became an existential one. This is worth understanding because it tells you how the situation ends. It does not end because underwriters rediscover their courage. It ends when the correlation breaks — either the conflict stops, or a sovereign balance sheet absorbs the layer nobody else will touch.

That second mechanism is what the WEF was describing in April. Several governments have stood up state-backed war risk facilities, and the reflex among traders has been to treat the problem as solved. Read the fine print first. State schemes exist to protect a national interest, and national interest almost always means nationally-flagged tonnage, nationally-owned cargo, or strategically essential imports — energy, grain, pharmaceuticals. A third-country charterer moving Chinese industrial equipment into a Gulf port on a Panama-flagged heavy-lift vessel does not obviously appear anywhere in that sentence. A sovereign backstop existing somewhere in the system is not a sovereign backstop existing under your shipment. The only way to find out which you have is to name the scheme, the flag and the cargo category and check.

Project cargo happens to be precisely the wrong shape for a contracting insurance market, in four separate ways. The heavy-lift fleet is small — a few hundred relevant vessels worldwide against tens of thousands of boxships and bulkers — so there are simply fewer hulls to spread a regional exposure across. Unit values are absurd: one lift can carry more insured value than an entire container vessel's manifest. Port dwell is long, because craning a two-hundred-tonne module aboard is a multi-day operation, and a vessel sitting alongside in a threatened port accumulates exposure in a way a vessel making fifteen knots does not. And the cargo is usually non-substitutable. If a refinery's replacement reactor vessel fails to arrive, there is no spare in a warehouse in Dubai, and the liquidated damages under the EPC contract will comfortably exceed the value of the thing that did not turn up. Underwriters understand all four points better than their customers do, which is why heavy-lift capacity leaves early and comes back late.

The contractual exposure nobody has checked sits in two places. First, Incoterms. Under CIF or CIP the seller arranges insurance — but the standard institute cargo clauses exclude war and strikes, which are a separate add-on, and CIF obliges the seller only to minimum cover, which does not include it unless your contract says so in words. Under FOB, CFR, FCA or EXW the risk passed to you at or before loading, meaning the entire war-risk exposure on a Gulf voyage has been yours since the goods crossed the rail in Shanghai. A great many GCC importers are carrying uninsured war risk this morning because they assumed CIF meant covered. CIF has never meant covered. It means the seller bought the cheapest policy that satisfies the letter of the term.

Second, the charterparty. Conwartime and Voywar clauses let the owner refuse to enter, or leave, any area the master judges dangerous, and recover additional war risk premium, crew bonuses and deviation costs from the charterer. If your forwarder chartered space on your behalf, those costs land on you, and they are not capped by the freight rate you were quoted. You agreed to this. It was on page eleven.

The posture for Q2 is to stop treating this as a freight question and start treating it as a schedule question. Freight rates recover quickly once a route reopens. Insurance capacity does not, and berth availability at alternative ports certainly does not. If your machinery delivery underpins a construction milestone, work the problem at the milestone: resequence the installation programme, pre-position long-lead items outside the risk zone, and renegotiate the liquidated damages exposure downstream — rather than shopping for a better rate on a voyage that may not be insurable by the time the vessel is ready to sail.

QC Checklist for Importers

• War Risk Cover Confirmation Before Every Sailing: Get written confirmation from the carrier or charterer that cover is in force for the specific voyage and the specific Gulf discharge port, dated within seven days of sailing. Cover that existed at booking proves nothing about cover at transit, which is the only moment that counts

• Incoterms War Risk Gap Audit: Review every open PO against its Incoterm and establish in writing who is buying the war and strikes add-on. Under CIF the seller owes you minimum cover, which excludes it; under FOB or FCA the exposure has been yours since the Chinese quay. One of these is a surprise you can still prevent

• Conwartime and Voywar Cost Pass-Through Cap: Ask your forwarder for the war clauses in the charterparty covering your cargo, then negotiate a stated cap or sharing formula on additional premium, crew bonus and deviation costs. Uncapped, they flow straight to the charterer and can exceed the base freight

• Sovereign Backstop Eligibility Check: If you are relying on a state-backed facility, name it, then confirm your flag, cargo category and ownership sit inside its criteria. Most schemes protect national tonnage and strategic goods. Third-party industrial equipment is nobody's national interest

• Heavy-Lift Booking Lead Time Extension: Push booking lead times for out-of-gauge and heavy-lift to a minimum of twelve weeks for Gulf discharge. The specialised fleet is small, capacity thins first in a contracting market, and a spot booking right now is a schedule risk wearing the costume of a cost saving

• Alternative Discharge Port Pre-Qualification: Pre-qualify at least one discharge port outside the primary risk corridor with the crane capacity and heavy-haul clearance for your largest unit. A diversion decided mid-voyage, to a port nobody has surveyed, is how out-of-gauge cargo becomes a permanent feature of somebody's quay

• Downstream Liquidated Damages Renegotiation: Where imported equipment underpins a commissioning milestone, open the force majeure and delay provisions now. Arguing that a documented chokepoint closure excuses delay is considerably easier before the delay than during it

• Cargo Value Concentration Limit: Split high-value equipment across multiple sailings rather than consolidating for freight efficiency. Concentration is exactly what underwriters are pricing against, and a single total loss on a consolidated shipment ends a mid-sized importer rather than inconveniencing one

• Long-Lead Item Pre-Positioning: Identify anything on your equipment schedule with lead times over six months and assess shipping it early into bonded storage outside the risk corridor. Storage is a rounding error against a stalled commissioning programme

• Insurance Broker Escalation Path: Build a direct relationship with a marine war risk specialist rather than leaning on your general commercial broker. In a withdrawn market capacity is allocated by relationship and response speed, and a broker without a Lloyd's war risk practice is queuing behind people who have one

Sources — editorial verification, remove before publishing

• Al Jazeera, 3 Mar 2026 — "Maritime insurers cancel war risk cover in Gulf"

• International Group of P&I Clubs — 72-hour cancellation notices issued 2 Mar 2026; cover lapsed by 5 Mar; 150+ tankers idled. VERIFY the 150 figure and exact dates against the IG's own circulars

• Howden Re, "Strait of Hormuz" report, 26–27 Mar 2026

• World Economic Forum, Apr 2026 — "How Middle East war is turning governments into insurers of last resort"

• The Middle East Insider, 25 Apr 2026 — Red Sea shipping disruption status and cost impact

• Incoterms 2020 and Institute War Clauses (Cargo); Conwartime 2013 / Voywar 2013. Editorial note: general contract mechanics, not 2026 developments