Geopolitical Risk Premium

A geopolitical risk premium is the extra cost loaded onto freight rates, insurance, or fuel pricing to reflect conflict, sanctions, or instability along a trade route. In marine insurance it appears as the additional premium (AP) a war-risk underwriter charges for a call or transit into a Joint War Committee listed area, quoted as a percentage of insured hull value per voyage or per seven-day period. After the Red Sea attacks from late 2023, Red Sea AP rose from roughly 0.1% to as much as 0.7% to 1.0% of hull value, then eased as traffic rerouted.