On 1 March 2026, Skuld issued a Notice of Cancellation to the War Risk Cover to all fixed premium assureds, including charterers (“Skuld Notice of Cancellation”), and upon expiry of the notice at 00:00 hrs GMT (Midnight), 5 March 2026, the War Risk cover for Assured(s) was terminated automatically for the Assured(s) trading or being within the territorial waters of any of the following countries or places (including any port area that at the date of this notice constitutes part of such a country or place however it may hereafter be described):
- Iran and Iranian waters including coastal waters up to 12 nautical miles offshore
- Persian/Arabian Gulf and adjacent waters as defined
Definition
Persian/Arabian Gulf and adjacent waters including the Gulf of Oman and waters west of the line from Oman’s territorial limit off Cape al-Ḥadd at 22°42.5'N, 59°54.5'E northeast to the Iran-Pakistan border at 25°10.5'N, 61°37.5'E.
This was the third Notice of Cancellation provided by the Association reinsurers, following the NoC for the “Red Sea Excluded Area” and the NoC for the “RUB [Russia Ukraine Belarus] Excluded Area”. Cover for losses, damages, liabilities, costs or expenses in the RUB Excluded Area are excluded under the Territorial Conflict Exclusion Clause in Charterers' 2025 and 2026 Terms and Conditions.
The below advice and recommendations apply to all three notices.
Cover
Subject to certain exclusions, Charterers' Terms and Conditions includes cover for liabilities, costs or expenses arising out of or in connection with the following risks ("War Risks"):
- a. war, civil war, revolution, rebellion, insurrection or civil strife arising therefrom, or any hostile act by or against a belligerent power, or any act of terrorism (provided that, in the event of any dispute as to whether or not, for the purposes of this paragraph (a), an act constitutes an act of terrorism, the decision of the directors of Skuld shall be final);
- b. capture, seizure, arrest, restraint or detainment (barratry and piracy excepted) and the consequences thereof or any attempt threat;
- c. mines, torpedoes, bombs, rockets, shells, explosives or other similar weapons of war,
- d. strikers, locked-out workmen, persons taking part in labour disturbances, riots or civil commotions;
- e. any person acting maliciously or from a political motive; or
- f. confiscation, nationalisation, deprivation, requisition or expropriation.
It is important to note that standard P&I cover is not prejudiced by trading in the affected areas. It is only the War Risk cover which is excluded; hence any ordinary P&I risks and liabilities would not be affected, even when the vessel is within the excluded areas. It is further noted that cover under Skuld's Freight, Demurrage and Defence (FD&D) product is not impacted by trading in the excluded areas.
Buy-back of War Risks P&I cover
There is currently the possibility to buy back the War Risk P&I cover for the Persian Gulf/Gulf of Oman, RUB and Red Sea Excluded Area.
Please contact your underwriter in Skuld for further details and terms.
Recommendations
In the meantime, to limit the risk of a recourse action from owners or their subrogated insurers for losses or damage arising out of War Risks in the Excluded Area, we recommend that:
- charterers are named as co-assured on Owners' War Risks, Loss of Hire (if not included under the War Risks cover) and K&R insurance policies; and/or
- any right of recourse against charterers by owners or their subrogated insurers for the insured loss is expressly waived in the charterparty.
Each case will turn on its specific facts and the provisions contained in the relevant contracts but following the recent decision of the English Supreme Court in The Polar [2024] UKSC 2, a charterer is unlikely to succeed in avoiding a recourse claim from owner or their subrogated insurer simply because charterer is required to pay, or reimburse owner for, the insurance premiums under the charterparty.
Potential exposure
In addition to the risk of recourse claims under the charterparty, the charterer may also be directly exposed to third party liabilities in the following hypothetical scenarios (this is a non-exhaustive list, and there may be other scenarios where the charterer may be exposed):
- Pollution incidents whereby a specific local jurisdiction may impose direct liability on the cargo owner and/or charterer. This is especially relevant if the charterers' cover includes a Cargo Owner's Legal Liability (COLL) extension
- Failure of owners' war risk insurance to react, which could force third parties and/or local governments to look to charterers for compensation
- If charterers issue the bills of lading, and there is damage to the cargo as a result of a war risk, and a claim is brought by cargo interests under the bill of lading against the charterers in the first instance
If charterers have any questions or concerns about the impact of the notices of cancellation on their covers with Skuld, we recommend that they contact their Skuld underwriter for further advice and recommendations.