With geopolitical tensions simmering across the globe, Australian businesses with international interests are facing a stark reality: traditional insurance products may not cover losses due to war, terrorism, or civil unrest. Enter war risk insurance—a specialised policy designed to fill those gaps and provide peace of mind when the world feels anything but peaceful.
Why War Risk Insurance Matters in 2025
From shipping lines navigating contested waters to airlines flying over politically unstable regions, war risk insurance is no longer just a niche product. In 2025, several global flashpoints and supply chain disruptions have prompted Australian regulators and insurers to revisit what ‘adequate protection’ really means for local companies:
- Geopolitical flashpoints: Ongoing tensions in the South China Sea, Eastern Europe, and the Middle East have led to increased government advisories and risk premiums for Australian exporters and logistics providers.
- Cyberwarfare: The lines between kinetic conflict and cyber attacks are blurring. In January 2025, ASIC clarified that war exclusions in cyber insurance policies must be explicitly defined, following high-profile ransomware incidents linked to state actors.
- Supply chain exposures: Australian manufacturers and agribusinesses relying on international transit routes are now required by some lenders to demonstrate active war risk coverage as part of their risk management protocols.
What Does War Risk Insurance Cover?
War risk insurance policies can be tailored to specific industries and exposures. Broadly, they fall into two categories:
- Aviation and Marine War Risk: Covers aircraft, ships, and cargo against loss or damage resulting from war, civil war, insurrection, rebellion, hijacking, and terrorism. In 2025, major Australian insurers like QBE and Lloyd’s syndicates are offering bespoke solutions for shipping lines transiting high-risk zones.
- Political Violence and Terrorism: Extends to damage from riots, strikes, sabotage, and politically motivated attacks. Australian commercial property owners in CBDs have seen a spike in demand for such cover following the 2024–25 protests in major cities.
Policy specifics may include:
- Physical damage to insured property
- Loss of income due to business interruption
- Costs related to evacuation or repatriation of staff
- Third-party liability claims
Notably, exclusions are tightly defined. Most war risk policies will not cover nuclear, biological, or chemical attacks, or losses stemming from government confiscation or seizure.
2025 Policy Trends and Regulatory Updates
The Australian insurance landscape is evolving in response to global and domestic risks:
- Mandatory Disclosure: In April 2025, the Australian Prudential Regulation Authority (APRA) introduced new guidelines requiring insurers to clearly communicate war and terrorism exclusions at policy inception. This aims to address confusion and prevent coverage gaps for businesses operating in conflict-prone regions.
- Premium Adjustments: With Lloyd’s and global reinsurers increasing their exposure limits, premiums for war risk cover have risen by 10–20% on average for Australian shipping and aviation clients since late 2024.
- Bundled Solutions: Australian brokers are increasingly offering bundled war risk and cyber war extensions, reflecting the hybrid nature of modern threats. Businesses are advised to review whether their cyber and property policies overlap or leave exposures unaddressed.
Real-world example: In February 2025, an Australian logistics company suffered losses after its vessel was seized amid regional hostilities in the Red Sea. Thanks to comprehensive war risk insurance, it recouped significant costs and was able to maintain contractual obligations to clients, highlighting the practical value of these policies in volatile times.
How to Assess If You Need War Risk Insurance
War risk insurance isn’t just for multinational giants. Here are key triggers for Australian businesses to consider:
- Your business owns or charters vessels or aircraft operating internationally
- You have assets or personnel stationed in politically unstable regions
- Your supply chain relies on transit through high-risk zones
- You operate in industries flagged for potential terrorism or political violence exposure (e.g., energy, infrastructure, logistics)
Best practice in 2025 is to conduct a comprehensive risk assessment, review contract requirements (such as lender mandates or lease obligations), and work with a specialist broker to secure tailored coverage. Insurers now provide scenario-based modelling to help businesses visualise the impact of different conflict events and plan accordingly.
