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January 1991: War tensions heat up market

January 1991: War tensions heat up market

War risk underwriters spent last week preparing for battle in the Middle East.

Insurers drastically increased aviation and marine war risk rates and considered exclusion zones, forcing airlines and shipowners either to pay inflated premiums or cease operations in the region.

As war nears, political risk coverage has virtually dried up for businesses in the Middle East. And most installations in the area are not covered for property damage caused by war, since only a handful of underwriters insure war risks on land.

However, U.S. government officials may make war risk coverage available to American airlines and shipowners if commercial coverage becomes unavailable.

The war risk market is changing daily as the Jan. 15 United Nations deadline for Iraq to pull out of Kuwait approaches.

Many war risk insurers are charging what are known as additional premiums-or a charge above the basic worldwide war risk premium-for aircraft, ships and cargo in the Middle East.

These premium quotes for flights and voyages are changing with increasing frequency.

Premium increases since the New Year vary among policyholders. Rates now range from double the year-end figures to 1,500% higher.

Leading war risk underwriters, mainly underwriters in the London marine market who write both aviation hull and marine war risks, are reviewing the situation daily to decide what rates to quote.

“Every day that we get nearer to the U.N. deadline, the situation changes … day by day, hour by hour,” said Richard Hilliard, managing director of London broker Leslie & Godwin Marine Ltd.

Rates “will change day by day as it gets to the crisis point,” added John Parton, former chairman of the Institute of London Underwriters and assistant general manager for the marine division of Guardian Royal Exchange Assurance Group PLC.

It is difficult to predict what underwriters will charge as the UN deadline nears this week because this conflict poses a greater threat to insurers than any previous conflict, according to Stephen Merrett, chairman of Lloyd's Underwriters' Assn and chairman of underwriting agency Merrett Holdings PLC.  

The above article was first published in the Jan. 14, 1991, edition of Business Insurance. To access complete, searchable copies of Business Insurance going back the magazine’s launch in 1967, click here