You’ve probably noticed your petrol costs more this week. Your grocery bill is creeping up. Flights to and from certain destinations have been cancelled or rerouted.

The obvious explanation is the war. Iran, the blockade, the instability. But the less obvious explanation is more interesting: a lot of these price changes aren’t being driven by bombs or blockades. They’re being driven by something you only think about once or twice a year.

Insurance.

Specifically, by a small group of people in London who decide what is and what isn’t insurable right now. These are underwriters: the people who assess risk and decide whether to offer insurance, and at what price. Their decisions are shaping the economic fallout of this conflict more than most military operations. And the money behind those decisions includes yours.

The basic idea

Every ship that carries goods across the world is insured. If a ship is damaged or destroyed, someone pays out. That’s standard.

But there’s an extra layer of insurance called war-risk cover. It protects against damage from conflict, terrorism, and political violence. In normal times, it’s so cheap that nobody thinks about it. A fraction of a penny on every pound of cargo.[1]

When a conflict breaks out, it gets expensive. Very expensive.

During the Houthi attacks on Red Sea shipping in 2024, the cost of war-risk insurance for a single voyage jumped from around $50,000 to as much as $1,000,000 for a large vessel.[1][3][4] That cost gets passed on. To the cargo owner, then to the retailer, then to you.

And the same is happening now in the midst of the US-Israel attack on Iran.

But price is only half the story. The bigger question is whether insurers agree to cover a route at all. Because if they won’t, ships don’t sail. Not because of a military blockade. Because no shipping company will send an uninsured vessel into a war zone.

That means insurers get to decide which trade routes stay open and which ones shut down.

Who makes the call?

In London, a body called the Joint War Committee maintains a list of areas it considers too dangerous for normal insurance to cover.[2] It’s made up of underwriters from Lloyd’s of London, the centuries-old insurance marketplace where much of the world’s shipping risk is bought and sold. When they add a region to the list, the cost of shipping through or near that area spikes overnight.

Think of it as a risk map. But instead of being drawn by a government or a military, it’s drawn by the insurance industry. And it has immediate, real-world consequences.

In January 2025, the committee had already added Bahrain, Djibouti, Kuwait, Oman, and Qatar to its listed areas, alongside expanded zones across the Red Sea and parts of the Pakistan coast.[5] That was before the current conflict escalated. The map is almost certainly wider now.

When a country or waterway gets added to that list, it doesn’t just affect the military. Everything that moves through that area gets repriced. Food, fuel, medicine, consumer goods. The insurance cost ripples through the entire supply chain and lands in your weekly shop.

This has happened before

This isn’t theory. It has played out repeatedly in recent years.

When Russia invaded Ukraine in 2022, insurers declared the Black Sea too dangerous.[6] Grain shipments stopped. Not because Russia sank the ships. Because no one would insure them.

The UN had to step in and broker a deal that included insurance guarantees before a single grain ship could move.[7] Over the next year, more than 33 million tonnes of grain reached over 40 countries through that corridor.[8] When Russia pulled out and insurance conditions fell apart, the corridor collapsed. Millions of people’s food supply was determined not by a general, but by whether underwriters in London would sign a policy.

The same pattern played out in the Red Sea. Houthi forces attacked commercial shipping throughout 2024.[9] Insurers hiked their prices. Major shipping companies looked at the maths and decided it was cheaper to go around Africa, adding two weeks to every journey, than to pay the insurance bill for the shortcut through Suez. Canal traffic dropped by more than half.[10]

The ships could have sailed through. They chose not to, because the insurance made it uneconomical.

Why this matters for the Iran conflict

The Strait of Hormuz is blocked. That’s the headline. But the insurance story is about everything around it.

Flights are being rerouted partly because aviation insurers are pulling war-risk coverage over widening airspace. That means longer routes, higher fuel burn, and more expensive tickets and air cargo.

Ports across the Gulf that aren’t directly in the conflict zone are seeing their insurance costs rise, because the danger zone on the insurers’ map keeps expanding. Some smaller shipping companies can’t afford the new premiums. They simply stop serving those routes.

Military contractors need insurance to operate. When coverage becomes unaffordable, contractor operations scale back. That affects what military operations are sustainable over time.

In every case, it’s not the fighting that determines the economic impact. It’s the insurance.

The uncomfortable bit

Here’s where it gets awkward.

The companies behind these decisions are publicly listed. Swiss Re and Munich Re are reinsurers, which means they insure the insurers. When a Lloyd’s underwriter takes on a big war-risk policy, they offload some of that risk to companies like Swiss Re and Munich Re. These reinsurers sit at the top of the chain. They’re in the MSCI World Index, which means they’re in most workplace pensions and global tracker funds.[11][12] Berkshire Hathaway, which owns one of the world’s largest reinsurers, sits in the S&P 500. If you have a pension or an index fund, you almost certainly own a piece of them.

Their business model during a conflict is straightforward. Danger goes up. Premiums go up. Revenue goes up. There is a financial incentive for insurers to keep wars insurable, because that’s when they make the most money.

But there’s a genuine tension here. If insurers refused to cover anything near a conflict zone, civilian supply chains would collapse. Food and medicine move on the same insured ships as everything else. The industry enables the economics of conflict and the economics of survival through the same mechanism.

This isn’t a villain story. It’s a structural one.

Your “ethical” fund probably holds them

Here’s the bit that connects to your money.

When ethical funds screen insurance companies, they use something called ESG ratings. ESG stands for Environmental, Social, and Governance. It’s a scoring system that measures how responsibly a company behaves. The problem is, for insurers, these ratings only look at what the company invests its own money in. Does its portfolio hold arms stocks? Fossil fuel companies? That screening is well-established.[13]

What they almost never look at is what the insurer actually does for a living. The risks it chooses to cover. The wars it makes economically viable.

It’s like checking whether a bank recycles its office paper while ignoring who it lends money to.

An insurer can have a spotless investment portfolio and still spend its days writing policies that cover arms shipments, fossil fuel transport, and war-zone logistics. That’s its actual business. But the ethical screen doesn’t look at it.

Both Swiss Re and Munich Re hold AAA ESG ratings from MSCI, the highest possible score.[11][12] Swiss Re sits in the Dow Jones Sustainability World Index and the FTSE4Good Index.[15] These are the ratings and indices that ethical funds use to decide what counts as a responsible investment. Both companies pass with flying colours. And both companies’ core business is pricing and enabling risk in conflict zones.

Your “ethical” pension almost certainly holds them. Not because the screening failed. Because it was never designed to look at what these companies actually insure.

What needs to change

The deeper problem isn’t who makes the decisions. It’s that once a decision is made, it cascades automatically. When the JWC marks a region as dangerous, surcharges written into standard shipping contracts kick in on their own. Nobody negotiates. Nobody appeals. Costs just go up, everywhere, all at once.

That’s not inevitable. It’s a design choice. Here are five ways to redesign it.

1. Share the risk, cut out the middleman. Right now, war-risk insurance is sold by commercial insurers who take a profit on every policy. But insurance doesn’t have to work that way. In other parts of shipping, companies already pool their money into shared funds. Everyone pays in, everyone is covered, and nobody is skimming a margin off the top. War-risk cover could work the same way. The European Commission has already approved a state-backed scheme along these lines for Ukraine, covering war-related transport risks through a public fund backed by government guarantees rather than the commercial market.[16]

2. Build a permanent safety net, not an emergency one. When the Black Sea grain corridor was set up in 2022, governments and international organisations had to scramble to create insurance from scratch, backed by public money, so that grain ships could sail.[7] It worked. 33 million tonnes of food reached over 40 countries.[8] But it took months to build and collapsed when political support fell away. A permanent, pre-built facility backed by governments would mean we don’t have to reinvent the wheel every time a conflict cuts off a trade route. The infrastructure would already be there.

3. Stop the automatic price shock. When the JWC marks a region as dangerous, shipping contracts currently treat it as all-or-nothing. Listed means full surcharges, immediately. But a region can be slightly risky or extremely risky, and the response should reflect that. Introducing a sliding scale, where different levels of risk trigger different levels of cost, would stop a single designation from sending prices through the roof overnight.

4. Give affected countries a voice. When the JWC adds a country to its danger list, that country’s trade costs spike. Its ports lose business. Its people pay more for imports. But it has no right to challenge the decision, no consultation process, and no appeal. Financial regulators in other areas are required to consult the public before making rule changes. There is no reason the same principle shouldn’t apply here.

5. Screen what insurers actually do, not just what they invest in. Swiss Re and Munich Re hold the highest possible ethical ratings while their core business is pricing and enabling risk in conflict zones. That’s because the ratings only look at what these companies invest in, not what they insure. If that changed, the ratings would change. Fund managers would have to respond. Your money would start flowing differently. This is the reform that connects most directly to your pension.

None of these ideas are hypothetical. Every one has a working precedent somewhere in the financial system. They’ve just never been assembled for this purpose, because the current system works well enough for the people who profit from it.

What you can do now

  1. Email your pension provider or fund manager. Ask them this: “When you screen insurance companies in my portfolio for ethical or ESG compliance, do you assess what they insure, or only what they invest in?” The point of this question is not to get a satisfying answer. It’s to create a record of demand. Fund managers respond to patterns. If enough people ask the same question, it becomes a product risk for them to ignore. Most have never been asked. Be the first.

  2. Write to your MP, senator, or representative. The specific ask: war-risk designations made by the Lloyd’s Joint War Committee have the economic impact of government policy. They affect food prices, energy costs, and trade access for entire countries. But they are made by a private body with no public consultation, no formal appeals process, and no democratic oversight. Ask your representative to support legislation requiring that any private-sector body whose risk designations automatically trigger cost increases across international supply chains must operate under a public transparency and consultation framework. That’s a concrete, defensible policy position that doesn’t require anyone to understand insurance. It’s about private bodies making decisions with public consequences.

  3. Share this article. Not because we want traffic. Because the single biggest advantage this system has is that nobody knows it exists. The more people who understand how insurance shapes the economics of conflict, the harder it becomes for these structures to operate without scrutiny.

You didn’t know this system existed until today. Most people don’t. That’s how the financial system works. Not by hiding things, but by making them so technical that nobody thinks to ask.

Now you know where to look.

This is part of our series on what’s wrong with the financial system. If you want to stay informed, join the community.

References

[1] SAFETY4SEA, “Middle East War Risk Insurance Costs Surge Due to Conflict”

[2] London Market Association, “Joint War Committee”

[3] FreightAmigo, “War Risk Insurance Premiums 2025 Pricing Trends”

[4] Business Insurance, “Red Sea Shipping Insurance Costs Soar After New Attacks”

[5] The Swedish Club, “Listed Areas as per 1 January 2025”

[6] Ship Universe, “War Risk Insurance Surges for Black Sea Voyages”

[7] United Nations, “Black Sea Grain Initiative FAQ”

[8] United Nations, “Black Sea Grain Initiative”

[9] Atlas Institute, “The Red Sea Shipping Crisis 2024-2025”

[10] Maplecroft, “War Premiums, Shipping Risks Spike as Houthi Campaign Intensifies”

[11] Swiss Re, “SREN Shares”

[12] Munich Re, “Investor Relations: Shares”

[13] PwC, “ESG Impact on the Insurance Industry”

[14] As You Sow, “Lawsuit Challenging Chubb’s Refusal to Put Shareholder Proposal on Proxy”

[15] Swiss Re, “Swiss Re Once Again Selected for Membership in the DJSI World and DJSI Europe Indices”

[16] Insurance Business, “EU Approves Poland-Led War Risk Reinsurance for Ukraine Transport”