During a conflict, war risk underwriters differentiate premiums based on a vessel's situation. Ships already trapped in a high-risk zone pay a much lower rate (e.g., 0.5% of hull value) to get out, compared to ships voluntarily entering the zone to trade, which face rates as high as 3-10%.

A little-known feature of marine insurance is that the war risk component can be canceled by insurers with just a few days' notice during a crisis. Shippers are then forced to repurchase coverage at premiums that can be 10 to 30 times higher than the original rate, drastically altering voyage economics.

When commercial insurers cancelled war risk coverage for vessels in the Strait of Hormuz, the US government stepped in to provide political risk insurance. This ensures the flow of global trade and energy, demonstrating a powerful, non-obvious tool of economic statecraft.

Despite Asia's dominance in shipbuilding and shipping routes, the core financial infrastructure for maritime insurance remains concentrated in Western hubs like London and New York. Major global traders, including Asian firms, still primarily use P&I clubs and underwriters based in the UK, Scandinavia, and the US.

Ship owners need separate insurance policies because the market is specialized. Mutual P&I clubs cover unpredictable third-party liabilities (e.g., pollution). Commercial underwriters handle asset-based risks like physical ship damage (hull & machinery) and war, which they can price more conventionally.

The 12 major P&I clubs, while competitors, form an "International Group" to collectively purchase one of the world's largest reinsurance policies. This layered pooling structure allows them to cover catastrophic events up to $8 billion per incident, a level unattainable by any single club.

Iran effectively weaponized the Strait of Hormuz not with mines, but by creating enough uncertainty to make UK-based insurance companies pull out. This demonstrates how financial systems can be leveraged as powerful geopolitical choke points.

Ship owners form P&I clubs to collectively insure against liabilities that commercial insurers find too volatile to price. These not-for-profit mutuals pool funds, providing at-cost insurance and sharing risk across the industry rather than transferring it to a third-party for profit.

The "City of London," the UK's financial hub, operates with its own rules and predates the UK parliament. Its independent interests, particularly in banking and insurance, can create friction with long-standing allies like the US.