the mechanics behind the headlines
The source of the confusion is a contractual provision called notice of cancellation – built into every war risk policy as a mechanism by which underwriters cover reinsurance if there is a material change in the risk landscape. As hostilities escalated, P&I clubs, including the American Club, Guard, Skuld, Northstandard, and the London P&I Club, received such notices from their reinsurers concerning the limited circumstances in which the clubs provided war-risk coverage in the Persian Gulf and adjacent waters, and in turn issued similar notices to their members. The existing cover remains in force subject to a notice period of usually between three and seven days. After that window closes, new terms are issued at revised rates, and shipowners choose whether to reinstate them. “It’s more a rerating than a cancellation,” Ogulukian said. “From the beginning of the conflict, if an owner wants that cover, it’s been insurable. There’s never been a situation where it’s been pulled and there’s no cover of any kind.” Standard mutual P&I cover, he said, excludes war-risk as a listed peril. War-risk cover is a separate product placed in a specialist market, which can be reestablished by buyback on modified terms. That product was available the entire time.
