Authors
In the current geopolitical climate in the Middle East, as elsewhere in the world, the carriage of goods is increasingly exposed to exceptional risks, including missile attacks, seizure, hijacking, interruption of the voyage, substantial delay, and additional costs resulting from rerouting. For the insured, the matter is above all a practical one: to ascertain whether the cargo policy effectively covers the risks in question, for the precise duration of the shipment, and whether the necessary measures have been duly implemented. In this respect, it should be borne in mind that, under French law, war risks are excluded from standard policies and may be brought within coverage only by means of a specific buy-back or extension under a special policy. Certain provisions of such policies may also provide cover for goods located in territories affected by unrest or armed conflict.
Scope of coverage
Principle of exclusion
Under French law, Article L. 172-16 of the Insurance Code excludes the following war risks from standard cargo insurance policies: civil or foreign war, mines and all weapons of war, piracy, seizure, arrest, or detention by any government or authority, riots, strikes and lock-outs, and acts of sabotage or terrorism. This exclusion is reiterated and further specified in French cargo insurance policies.
In practice, the main risk for the insured lies in assuming, incorrectly, that the standard policy is sufficient, given the widening scope of the conflict. Therefore, in the event of any current or forthcoming shipment through the Middle East or any region exposed to similar risks, shippers must first ascertain whether a special “war risks” agreement has been concluded in respect of the voyage, taking into account its material, temporal and territorial (since policies generally exclude certain countries and territories) limits. Otherwise, the insured may be left uninsured against precisely those events which are currently the most critical.
‘War risks’ policies
War exclusions may be “bought back” through special “war risks” extension and policies.
Risks covered
Special war risks policies provide coverage for physical loss or damage to the insured goods, as well as for loss in weight or quantity resulting from war-related events, including civil war, hostile acts, mines, torpedoes and other implements of war, seizure, confiscation, detention, acts of sabotage, terrorism, piracy, coercion, and similar occurrences. They also extend to contributions in General Average, reasonable expenses incurred for avoiding or minimizing damages to the goods, expenses arising from interruption or termination of the voyage, costs of assistance, and the fees of the loss adjuster, provided that such expenses are consequent upon an insured event. Deprivation or unavailability giving rise to a right of abandonment is likewise covered where it stems from the events referred to above, whether that right derives from statutory provisions or from the terms of the policy, which may adopt either a narrower or a broader conception of the right of abandonment.
In the current geopolitical context in the Middle East, the principal risks threatening goods have already been identified: missile or drone strikes; mines or any other implement of war; confiscation, arrest or detention by an authority; hijacking, interruption, or stoppage of the voyage; forced transhipment, prolonged storage, costly rerouting, or prolonged unavailability of the goods.
In addition to these material risks, there is a specific insurance-related risk: War coverage may be subject to prior approval, the payment of an additional premium, or review depending on the region concerned. In practice, the insured must monitor market notices, verify whether the region is subject to case-by-case underwriting treatment, negotiate the buy-back where necessary, and incorporate the cost of the additional premium into the commercial pricing of the transaction. Coverage ultimately depends on the policy terms, scope, conditions, limits and exclusions.
Voyage coverage
The scope of voyage coverage will also depend on the temporal limits of the voyage:
- Waterborne coverage is confined to the maritime phase of the transit: It attaches when the goods are loaded on board the vessel and terminates upon unloading at the final port of discharge, and in any event no later than 15 days after the vessel’s arrival.
- Extended coverage applies to the entire voyage, including the inland, river, rail and air stages.
There are also sui generis forms of insurance coverage.
For goods transiting through the Persian Gulf, or neighbouring regions, insured parties must verify the exact point of departure, the exact destination, and any applicable extensions, all before departure.
Damage caused by delay
- Principle: Damages from delayed delivery of goods as a result of war are, in principle, not covered. Standard insurance policies exclude delay and its economic consequences, and war risks policies are not intended to indemnify purely financial loss caused by delay.
- Exception: Certain physical damage resulting from delays may nevertheless be covered, in accordance with the provisions of the applicable policy, including natural deterioration of the goods, as well as costs incurred as a result of stopping or interrupting the voyage in order to preserve, store, transport, or tranship the goods. Such costs may be compensated under the terms of the policy, whether or not physical damage has been sustained by the insured goods.
Best practice: Where the insured is exposed to a significant risk of delay-related losses, such as contractual penalties, loss of market, supply-chain disruption, or business interruption, we advise that the insured negotiate a specific clause or additional cover expressly extending to such financial consequences.
Occurrence of the risk
Policy terminations
With respect to exceptional risks, special policies may be terminated at any time. In cargo insurance, where coverage is written under an open cover or subscription policy, termination takes effect upon expiry of a period generally fixed at 48 hours from notice, or five days from dispatch where the notice has not reached its addressee. Such termination does not, however, affect goods whose coverage had already taken effect before expiry of that period, goods loaded thereafter if the insured was unable to prevent such loading, or specific shipments that are covered by a certificate of insurance were issued in good faith to a third party before expiry of that period.
Claims handling
After a covered event occurs, the insured should take the following steps:
- Claims notification: The insured must notify the claim immediately, even on a purely precautionary basis, in accordance with the formal requirements provided by the policy. Any delay may result in forfeiture of the right to indemnity if the insurer establishes that it has suffered prejudice as a result of such delay.
- Survey of losses: The insured must arrange for the loss to be surveyed and, where appropriate, request a survey by a loss adjuster within the time limits specified in the policy. In the event of disagreement with the adjuster’s findings, a further joint expert inspection may be sought.
- Preservation of goods and precautionary measures: The insured must contribute to the salvage of the goods and take all necessary steps to mitigate losses. This includes securing the goods, avoiding any aggravation of damage, making prompt decisions on sorting, repackaging, storage, discharge, and rerouting; then documenting each decision and each spending item. Failing this, the insurer may reduce the indemnity in proportion to the prejudice suffered.
- Preservation and exercise of rights of recourse: The insured must also preserve rights of recourse against the carrier and other parties involved. This requires making precise and substantiated reservations, promptly notifying third parties who may be liable, requesting in writing any useful extensions of time, and neither assigning nor waiving rights of recourse without the insurer’s consent.
- Presumption of marine risk: When no one can determine whether the loss arose from a war risk or a marine risk, Article L. 172-17 of the French Insurance Code provides that it shall be deemed to have resulted from a marine event. This legal presumption, designed to put an end to evidential difficulties and disputes concerning the characterization of the risk, operates primarily for the benefit of the insured, who may not have taken out coverage against war risks. It is, however, rebuttable; failing proof to the contrary, the insurer covering ordinary marine risks remains liable to indemnify.
Abandonment of goods
Abandonment allows the insured to transfer its rights in the goods to the insurer in return for payment of the full insured value. In cargo insurance, it may arise where the goods are totally lost, lost or damaged up to three-quarters of their value, sold during the voyage because of insured material damage, where the vessel is unseaworthy and onward carriage cannot begin within three months, or where no news of the vessel has been received for more than three months.
Notice of abandonment must be given in the prescribed form and within the applicable time limits. As a rule, abandonment may not be partial or conditional, although this may not necessarily be so in the case of replaceable goods. In practice, where the cargo is economically lost or permanently unavailable, the insured must promptly assess whether the matter still concerns simple damage or whether it in fact gives rise to abandonment.
Information
In all cases, the insurer must be kept informed of any developments affecting the goods.
During the term of the contract, the insured must report any material aggravation of risk pursuant to Article L. 172-3 of the Insurance Code, in particular where the vessel is compelled to enter an area possibly exposed to acts of war, to approach such an area in circumstances objectively increasing its exposure to the risk, to alter its route, or to be operated in a manner that increases the risks initially accepted by the insurer. Mere geographical proximity to a war zone is not in itself sufficient to constitute an aggravation of risk; such aggravation must be reflected in increased exposure having regard to the terms of the policy, the insured areas, and the actual conditions of navigation. In the event of non-disclosure, the insured may incur the sanctions provided for by insurance law and by the policy, which may range, depending on the circumstances, from an adjustment of premium to a reduction or forfeiture of coverage.
Limitation period
Actions arising out of an insurance contract are time-barred after two years. In a matter involving war, transhipment, expert assessment and recourse proceedings, that period may elapse quickly. The insured should therefore, from the outset, put in place a limitation timetable covering the claim against the insurer, recourse proceedings against third parties, and, where applicable, notice of abandonment. It should, however, be borne in mind that insurance law protects the interests of the insured and permits interruption of the limitation period by sending a letter by registered post with acknowledgement of receipt requesting compensation under the policy.
Conclusion
In the context of the conflict in the Middle East, the protection afforded to the insured depends on a limited number of simple yet decisive measures: ensuring that war risks are duly covered, verifying the exact scope of coverage, acting promptly in the event of a casualty, preserving the goods, safeguarding rights of recourse, and assessing without delay whether the circumstances justify abandonment. In cargo insurance, the effectiveness of the coverage depends as much on the terms of the policy as on the speed, rigor, and precision with which the insured handles the claim.
Client Alert 2026-053