Episode summary
How Shipping Insurance Really Works During a War | Odd Lots
Odd Lots
· · Hosts: Tracy Alloway, Joe Weisenthal · Guests: Dorothea Ioannou, Steven Ogullukian
Summary
War risk insurance is a separate layer from ordinary P&I coverage because war is not actuarially stable in the way routine maritime losses are. The guests explain that P&I clubs are mutual, non-profit structures that pool predictable liability risks for shipowners, while war cover is typically handled by specialist underwriters and only extended by clubs as excess coverage backed by reinsurance.
The conversation walks through how the maritime insurance ecosystem works: hull and machinery insurance covers the vessel itself, P&I covers liabilities to third parties, and reinsurance lets clubs spread very large losses across a wider market. The guests say the American P&I Club grew out of London-market practices and was created in 1917 after U.K. wartime restrictions made U.S. operators seek a domestic alternative.
On the Iran conflict and the Strait of Hormuz, the guests push back on headlines saying ships were “uninsured.” They say notices were largely about repricing war cover, not removing protection, and that the higher premiums reflected the sudden shift from peacetime assumptions to war-zone risk. Even so, the guests stress that safety decisions still sit with the vessel’s master, and many operators would rather avoid the route than simply pay up.
Key takeaways
- The guests say P&I clubs provide at-cost liability coverage for shipowners, while war risk is usually excluded from standard P&I policies.
- Steven Ogullukian says the International Group of P&I Clubs insures about 90% of oceangoing tonnage and buys reinsurance collectively.
- Dorothea Ioannou says the American P&I Club was created in 1917 after U.K. wartime rules blocked some U.S. operators from London coverage.
- The guests say war-risk notices in the Strait of Hormuz were mostly rate cancellations, not full cancellations of coverage.
- The guests say crew safety and the master’s judgment still determine whether a ship transits a conflict zone, even if insurance is available.
Notable quotes
“It is not entirely clear at the moment what is going on in the Strait of Hormuz”
“You can't really do that for war”
“collectively, the 12 clubs come together every year and they purchase policies”
“It's really a cancellation of the rate, not of the cover”
How the episode opens
Most other types of insurance. Is actuarially stable? Not always predictable, but actuarially you can analyze it.
You can't really do that for war. And then one thing I think is important to note, and this has been a topic of discussion, I think, on the war side is that, during the year in peacetime, it's very cheap. Yeah.
Okay. It's very cheap. And so I know that there was a lot of talk about the cancellations and, and stuff like that.
It's really they have to do that. Because they're not underwriting based on the ships transiting war areas. They're underwriting based on trading in peaceful areas.
So once an area then becomes subject to a war act, they do have to be able to rewrite that. And so even though they gave a notice of cancellation. So these are the headlines we saw.
at the beginning of the conflict saying that war risk insurance has been pulled right at the start of a war which was very confusing for a lot of people, me included. Yes, yes, yes. I was getting Instagram reels sent to me, trying to explain.
Yes. And complete misconception. And when you're getting reels on P&I insurances, you know, something big is going on.
Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway and I'm Joe Weisenthal. Joe, you know, I'm slightly obsessed with insurance, maybe obsessed isn't the right word.
But fascinated. Appreciative of insurers because I think there's a tendency to think of them as sort of limiting factors in the world. So, you know, if you can't get insurance in California, you can't build a house.
But I also think of them as enablers of certain behaviors. Right. I think that's a really good way to put it.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- war risk insurance
- maritime shipping insurance
- p&i clubs
- reinsurance structure
- strait of hormuz premiums
Companies and tickers mentioned
- American P&I Club
Watch the episode
Watch “How Shipping Insurance Really Works During a War | Odd Lots” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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