Insurance as a weapon and an early indicator of geopolitical risk

A merchant ship does not put to sea without three covers: hull and machinery, third-party liability (the "P&I clubs"), and, in dangerous waters, a war-risk insurance premium surcharge. Without them, ports refuse entry, banks will not finance the cargo, charterers will not sign. The system is binary: insured, the ship sails; uninsured, it stays at the quay. There is therefore no need to sink a vessel to stop it: it is enough to make its insurance unobtainable, or so costly that the voyage is no longer profitable. A prohibitive premium is worth a blockade, a blockade that requires no warship at all.

Beyond crises, insurance is a chokepoint of world trade, concentrated in London, among the P&I clubs and the reinsurers. Lloyd's "Joint War Committee", which lists high-risk areas, plays a central role: though private, it issues designations whose effects resemble an exclusion zone imposed by a state. This lock is already an instrument of sanction: the G7 cap on the price of Russian oil applies not through naval force, but through access to Western insurance, no cover above the cap. The riposte (a "shadow fleet" that self-insures) shows the limit of the lever, but confirms the principle: to control insurance is to control circulation.

War-risk insurance premiums are not only a weapon: they are also a sensor of geopolitical risk. They readjust faster, and sometimes more finely, than oil prices, equity indices or sovereign-debt spreads, because underwriters make their living by anticipating danger. The clearest precedent: in February 2022, the Joint War Committee classified part of the Black Sea as a high-risk area nine days before the invasion of Ukraine. Tracking the movements of these premiums, which are public, amounts to holding an early thermometer of the vulnerability of trade routes, alongside traffic data and intelligence.

Insurance is a promise to pay: turning it into a weapon does not destroy the risk, it displaces it. Toward a barely insured shadow fleet (if a tanker sinks, the oil spill is covered by no one); toward the state that becomes insurer of last resort, and so the taxpayer; toward the consumer, who pays the surcharge in the price of goods. And the weapon has its limits: premiums eventually come back down, trade is diverted without drying up, ships often pass through by paying a surcharge. Finally, the effect owes as much to the spontaneous reaction of a risk-averse market as to a deliberate strategy: an actor can trigger it, but cannot fully steer it.