05 August 2025
Hull & Machinery and War Risk Insurance Market Update
Q3 2025
The second quarter of the year has been dominated by major conflicts, which continue to have a serious impact on maritime operations. The 12 days of warfare between Israel and Iran were undoubtedly the biggest escalation in the Persian Gulf for more than two decades, and tensions remain extremely high despite a fragile ceasefire holding at this time. There was also a short but dramatic return to hostilities for India and Pakistan, along with the ongoing conflicts in Gaza and Ukraine. Added to all of the above is the fall of the Assad regime and the continued strikes against the Houthis in Yemen by both Israel and the US. The rise in geopolitical tensions has had a profound effect on shipping markets, creating some opportunities alongside a huge amount of additional risk, which the insurance market is reacting to on a daily basis. As always, the various global war insurers and the London market, which provide the vast majority of reinsurance, have proved to be agile and responsive in offering rapid solutions to the shipping community.
The Hull & Machinery market has remained soft during the second quarter, with many of the largest insurers in London looking to meet ambitious growth targets for 2025. Those looking to aggressively write new business or increase participation on their existing fleets have created an environment where most clean hull renewals are expected to attract some sort of reduction. There is, however, some discipline in the market, and a spate of recent large losses may do something to focus attention on the potential for overall loss ratios to return to negative territory in 2026. An overall erosion of the global premium due to successive reductions is likely to result in many portfolios returning to the red, and this is unlikely to be tolerated by management of companies and syndicates in the same way it was in the past, where multiple years of loss-making statistics appeared to cause little change in appetite. With this in mind, we could start to see a flattening in 2026 with less focus on growth and more pressure to remain profitable.
Two major fires on the ‘Morning Midas’ and ‘Wan Hai 503’ are ongoing serious casualty events, once again highlighting the risk of fire on car carriers and container vessels and the potentially catastrophic consequences. The insurance market remains wary of these vessel classes, and there has been a recent spate of other container vessel losses, including ‘MSC Elsa 3’, ‘MSC Antonia’, and ‘Phoenix 15.’ This is in addition to the very high-profile incident with ‘Dali’ in 2024. These incidents serve as a stark reminder of the serious financial losses which can be incurred by owners and insurers, as well as the safety risks for crews, the wider public and the environment.
At Gallagher, we pride ourselves on being much more than a transactional insurance broker, and we are continually looking to help our many clients around the world develop the best risk management practices. Risk management and safety at sea is a general theme of this report, and we welcome two guest contributions from BES Group and Zelim. BES group discuss the value of Condition Monitoring on ships, looking to continually monitor machinery to alert potential issues before they manifest as incidents, which have significant financial and time costs. Zelim introduce us to some tools which can be critical in quickly identifying people and objects in the water, which can significantly reduce the severity of man overboard incidents and also mitigate collision risk. We support any initiatives which may help our client to better manage their risks, leading to lower financial costs, improved insurance performance, and the safest possible environment for crew, passengers and other maritime personnel.

War Risks
On 13 June, Israel launched an offensive against Iran named ‘Operation Rising Lion’ with the clear goal of targeting Iran’s nuclear programme but also attacking large parts of the regime’s military infrastructure. This offensive continued for almost two weeks. Whilst difficult to get independent verification from inside Iran, the general consensus seems to be that the strikes have been very precise and extremely effective. Israeli strikes have taken place across the country, including Tehran. Iran has responded with ballistic and drone attacks, with impacts reported in Haifa and Tel Aviv. On 21 June, the US entered the conflict, targeting the Fordow, Natanz, and Isfahan nuclear facilities with B2 bombers and Tomahawk missiles. President Trump subsequently announced these strikes had a devastating effect on Iran’s nuclear capabilities, seemingly achieving the US objective. On 23 June, Iran responded by launching a strike on the Al Udeid US military base in Qatar. Whilst all missiles were intercepted, this was deemed another dangerous escalation, also bringing condemnation from Qatar. Immediately following this, Donald Trump announced he had brokered an immediate ceasefire, which both sides had agreed to. This fragile arrangement appeared to collapse within a matter of hours, with Israel accusing Iran of launching further ballistic missiles and vowing an immediate response. However, shortly afterwards, both sides announced they would continue to respect the ceasefire, which remains in place in July, although considered fragile.
On 22 June, it was announced that Iran’s parliament had voted to close the Strait of Hormuz, effectively choking off shipping and energy supplies. However, any move in this respect requires final approval from Iran’s Supreme National Security Council. The vote at this time was largely symbolic, and a closure remains highly unlikely.
There has been a marked increase in GPS spoofing, leading to vessels appearing in completely different locations. There has been speculation that this could lead to an increased collision risk. The case of the Front Eagle and Adalynn in the Persian Gulf on 17 June is an example where the GPS for Front Eagle was incorrect on multiple occasions prior to the collision. Whilst there has been some discussion over whether this could be a marine cyber incident, we should also consider that there are multiple other methods of collision avoidance, including radar and, of course, crew watch.
On 19 May, the Houthis announced a maritime blockade on Haifa port, with ships present in, or heading to the port, advised that the port will be on the list of targets. This is further to missile strikes on Ben Gurion Airport near Tel Aviv earlier in the month. US forces already struck the Houthis with powerful air raids in Yemen on 15/16 March, and President Trump issued a stern warning to stop all attacks against ships in the Red Sea, threatening ‘overwhelming lethal force.’ On 18 April, US strikes destroyed an oil terminal close to Hodeidah. A complete cessation of strikes by the Houthis against commercial shipping led to speculation that US strikes (and fear of further ones) against Houthi infrastructure have diminished their capability and appetite to attack commercial shipping. This is combined with the regime change in Syria, which is thought to make it more difficult for weapons to reach the Houthis, which previously came almost exclusively through that territory. However, on 6 July, the Houthis attacked Liberia Liberia-flagged bulk carrier ‘Magic Seas’ 51nm from Hodeidah, causing extensive damage. The crew abandoned the vessel, and it subsequently sank. On 7 July, the Houthis carried out a further attack on bulk carrier Eternity C, tragically causing four crew fatalities as well as the eventual total loss of the vessel.
These two attacks represent a serious escalation, thought to be a possible reaction to Israeli airstrikes and a belated response to Operation Rising Lion. Israel also attacked the Houthi port infrastructure and the vessel ‘Galaxy Leader’, which was seized illegally in 2023. The vessel radar was allegedly being used by the Houthis to locate commercial ships for targeted attacks.
During May, conflict briefly broke out between India and Pakistan following decades of uneasy peace between the two nations. A brief cross-border conflict erupted in the disputed Kashmir region. A US-brokered ceasefire took effect on 10 May, but tensions remain high between the two nuclear powers.
The War between Russia and Ukraine continues to present a risk for vessels transiting surrounding waters, most notably the Black Sea. Ports have been subject to aggressive targeting by opposition missile strikes throughout the course of the conflict. Predominant targets have been Ukrainian grain ports such as Odesa, Chornomorsk and Yuzhny. These ports facilitate enormous volumes of grain, and so Russian attacks have largely to intended to disrupt Ukrainian exports.
On 25 March 2025, it was reported that Russia and Ukraine had reached a mutual agreement to a maritime ceasefire in the Black Sea, which would grant safe passage to commercial shipping. Statements confirming this were released following US talks in Saudi Arabia with Russian and Ukrainian representatives. In return for maritime peace, the US committed to help restore Russia’s agricultural exports and to strive for the exchange of Ukrainian prisoners and the release of civilian detainees. Despite this announcement, insurers remain alert to potential escalations and continue to enforce tight warranties and due diligence practices.
No vessels have been attacked whilst transiting the Black Sea since the maritime ceasefire was implemented; however, Ukrainian ports have endured further aerial strikes, and vessels at berth have suffered damage as a result. On 3 July 2025, a Russian Iskander missile was launched into the Odesa port, inflicting damage to key infrastructure. Reports suggest that two civilians were killed and at least six others were injured, including two Syrian crew members of a ship unloading metal.
Beyond the cost of insurance, the sanctions requirements tied to calling Russian ports have continued to expand. In March 2025, the EU introduced its 16 sanctions package, which implemented new sanctions on frequented Russian load-ports including Primorsk, Ust Luga and Novorossiysk. In addition to the Oil Price Cap and supplemental EU restrictions, shipowners are faced with a strenuous compliance procedure for all matters concerning Russian voyages and cargo. It is expected that an 18th EU sanctions package will be implemented in July 2025, targeting Moscow's energy revenues, banks and military industry. On 17 July, this package was finally released following some resistance from Slovakia. The headline news is that the EU has agreed a new price cap – 15% below the western market price, to be reviewed regularly. That will see a cap of USD47.60 a barrel, around 30% lower than the previous. Furthermore, an additional 105 vessels were added to the sanctioned list, as well as Intershipping Services, a UAE-based company which operates the flag registries of Comoros and Gabon.
On 18 May 2025, a Greek-owned oil tanker was detained by Russian authorities. ‘GREEN ADMIRE’ had sailed from Sillamae, Estonia, in a near-fully laden condition, having loaded shale oil destined for Rotterdam. Upon entering Russian territorial waters and allegedly failing to respond to issued Russian warnings, the vessel was seized. The vessel had crossed into Russian waters in order to avoid shallows, a route deviation which was pre-agreed between Estonia, Russia and Finland, but Moscow unilaterally declared that the sailing passage was dangerous for navigation. The detention conveniently followed recent efforts made by Estonia to combat the Russian ‘shadow fleet’- vessels used to circumvent western sanctions. The Greek-owned tanker was released the next day, but the incident has broadened the concern regarding aggressive Russian naval manoeuvres.
There has been some recent concern around the sabotage of vessels calling Russian ports. This includes a possible attack on the vessel ‘Eco Wizard’ in Ust Luga on 6 July. This was the sixth similar incident this year on vessels following the loading of Russian petroleum products.
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