With heightened naval activity in the Arabian Sea threatening one of the world’s busiest maritime trade routes, Indian insurers are bracing for potential spikes in war risk premiums and disruptions to commercial shipping.
The escalating geopolitical tension between India and Pakistan, fuelled by a terrorist attack in Jammu and Kashmir, as well as India’s retaliatory missile strikes, is sending ripples of concern through India’s insurance industry, analysts have warned.
While premiums for vessels, including tankers serving India, remain stable for now, industry leaders warn that further escalation between the nuclear-armed neighbours could trigger sharp cost increases, posing challenges for insurers, shippers, and the broader Indian economy.
“If the situation deteriorates, say, a naval blockade or an incident involving a merchant vessel, premiums could double or triple overnight,” said analysts, adding that premiums could jump by 200 percent or more.
For Indian insurers, maritime trade accounts for over 90 percent of India’s trade volume, including crude oil imports from the Middle East and exports through ports like Mumbai, Mundra, and Chennai, making this crisis particularly acute.
The Indian government’s decision on May 4 to ban Pakistani ships from its ports and prohibit Indian-flagged vessels from entering Pakistani waters has already severed bilateral maritime trade, analysts said, though its economic impact is limited due to historically low trade volumes between the two nations.
However, the ban signals heightened risk, putting pressure on insurers to prepare for worst-case scenarios.
Indian insurers also face structural challenges.
Unlike global reinsurers, who often dictate war risk pricing, domestic insurers have limited capacity to absorb large-scale losses from a maritime conflict, with many relying on international reinsurance markets, which could impose stricter terms or higher rates.