Question on Notice of Cancellation – War and Strikes Risks (only).

With the outbreak of hostilities in and around the Middle East many insurers have exercised the War Cancellation Clause in their hull or cargo policies.

This has prompted a number of questions being put to me as Insured’s and Brokers were naturally disappointed.

First up, I would explain that this is not a new development. While the exclusion of war risks (“Free of Capture and Seizure” or the F.C. & S. clause) gained traction in 1898, the formalization of short-notice cancellation provisions for war risks generally developed alongside the expansion of war-risk insurance, particularly around the time of the First World War.

For convenience I reproduce the Institute War Cancellation Clause (Cargo)

This clause is now standard when War Insurance is taken out. In some cases, depending on the risk, an insurer (either the current insurer or a fresh insurer) may agree to reinstate the coverage but charge an additional premium based on the risk of loss or damage. In other cases, where the risk is deemed too great, they may not be prepared to do so.

It is being reported that Insurers are providing War Risk insurance to ship owners in the Persian Gulf through to the Gulf of Oman

Where cover is removed, it is my experience that, insurers will provide a refund for the the unused premium for war risks stating on the first day of no cover offered to the end of the period of insurance.

If and when things settle down, insurers are typically prepared to reinstate coverage again.