Wars are usually measured in destroyed buildings, displaced people, and lost output. But some of their most durable economic effects show up in a quieter place: insurance pricing. When conflict changes the cost of covering ships, aircraft, factories, or infrastructure, it changes whether trade happens at all, whether investment is financed, and how fast recovery can begin.

Global trade is not just moved by ships, it is insured by them. UNCTAD estimates that roughly 80% of global goods trade by volume is carried by sea. In its 2024 maritime assessment, it warned that disruptions across major waterways were reshaping global shipping routes. In early 2024, container traffic through the Suez Canal fell sharply, while rerouting around the Cape of Good Hope increased significantly, with hundreds of ships diverted as risk perceptions changed.

When insurance costs rise, trade does not slow gradually. It reroutes. Insurance determines whether capital is willing to move through space at all.

Case Study: The Red Sea Crisis and the Repricing of Trade Routes

The same logic is now visible in the Red Sea, where the crisis has turned a strategic route into a live case study in economic friction. About 12% of global trade, including 30% of global container traffic and roughly $1 trillion in goods a year, passes through the Red Sea. It also reported that many carriers rerouted around Africa’s Cape of Good Hope, adding at least 10 days to travel times. That creates a cascade: longer voyages raise fuel consumption, delay deliveries, tighten vessel supply, and lift freight rates. UNCTAD noted that disruptions in key waterways can increase shipping costs and alter connectivity, with developing countries particularly exposed to those shifts.

Those higher transport costs do not stay inside shipping balance sheets. Reuters reported in January 2024 that the Red Sea disruption was already raising fears of a new round of global inflation, because higher freight and insurance costs eventually feed into the prices of food, manufactured goods, and industrial inputs. War-risk premiums on ships rose from about 0.7% to around 1% of vessel value in January 2024, and later reached as high as 2% on some transits. On a $100 million ship, that can mean $1 million to $2 million in extra insurance cost for a single voyage.This is one of the least discussed channels of post-war inflation: not energy alone, not sanctions alone, but the premium that conflict puts on movement itself. Once risk is repriced, the cost of getting anything from point A to point B becomes a macroeconomic variable.

Case Study: The Russia-Ukraine War

The Russia-Ukraine war shows the same mechanism, but with longer-lasting effects. Reuters reported in March 2024 that Ukraine expanded its marine war insurance program with Marsh and Lloyd’s from grain shipments to all non-military cargo, including iron ore and steel. The scheme offered $50 million of hull war-risk cover and $50 million of protection and indemnity coverage per voyage, and the earlier grain program had cut war-insurance premiums by more than half. Even so, usage remained in the “single digits,” which is the uncomfortable truth behind recovery finance: if premiums are still too high, access remains too low.

Before that, the market had already shown how quickly risk can become expensive. War-risk premiums on Black Sea grain shipments had risen to as much as 3% of a vessel’s value after a missile damaged a merchant ship in the Ukrainian port of Pivdennyi. That kind of pricing changes economics immediately. A cargo may still be physically movable, but if insurance and trade finance become too costly, it is functionally stranded.

When Airspace becomes a Cost Variable

Aviation is the same story with wings. Reuters reported in January 2024 that Ukraine’s airspace had been closed since Russia’s February 2022 invasion, and Ukraine was discussing military risk insurance for air transport with Marsh and Oliver Wyman as part of plans to restore flight connections. A 2024 open-access study in Transportation Research Procedia found that the closure of Ukrainian and Russian airspace raised Europe-Asia airfares for affected routes by an average of $43, or 5.4% of the mean fare for flights above the 50th parallel. The paper also found that each additional minute of flight time due to the closures raised fares by $1.56. In other words, airspace closures are not merely geopolitical symbols. They are price engines.

Property Insurance and Reconstruction

Property insurance becomes even more important, when reconstruction should begin but capital is still afraid. Ukraine’s total reconstruction and recovery cost was nearly $588 billion over the next decade, almost three times projected 2025 nominal GDP. Moreover, direct damage had reached more than $195 billion, with housing, transport, and energy among the worst-hit sectors; 14% of housing had been damaged or destroyed, affecting more than three million households. If you want to know why post-war recovery slows, the answer is not just broken roads or power grids. It is also the lack of risk-transfer machinery that lets private capital arrive safely.

That is why insurance is becoming a recovery tool, not just a commercial service. In December 2024, the European Bank for Reconstruction and Development launched a €110 million guarantee to jump-start war-risk reinsurance for inland transport in Ukraine, with the bank estimating the scheme could facilitate insurance cover for more than €1 billion worth of goods and vehicles in transit each year. Aon and the U.S. International Development Finance Corporation introduced a $350 million war insurance program for Ukraine, including $300 million for healthcare and agriculture and $50 million in war reinsurance. These are not symbolic gestures. They are attempts to make otherwise unbankable activity bankable again.

System-Level Insight: Insurance as a Transmission Mechanism

The bigger economic lesson is that wars are now transmitted through systems of fragility, not just destruction. McKinsey’s 2024 Supply Chain Leader Survey found that nine in 10 respondents had encountered supply chain challenges in 2024, only a quarter had formal board-level processes for discussing supply chain issues, 73% reported progress on dual sourcing, and 60% were regionalizing supply chains. McKinsey also found that once companies suffer a disruption, it takes them an average of two weeks to plan and execute a response. That is why conflict-induced insurance shocks matter: they expose how little slack modern economies have, and how quickly costs spread from ports and air routes into factories, inventories, and prices.

There is also a broader macro cost to all this fragmentation. According to estimates, severe trade fragmentation could reduce global output by as much as 7%, or about $7.4 trillion in today’s dollars. That figure is not specifically an insurance estimate, but it is the right scale for understanding what happens when conflict pushes firms to reroute, duplicate supply chains, pay higher premiums, and avoid whole geographies. Insurance is one of the mechanisms that turns geopolitical uncertainty into persistent economic cost.

Conclusion

The constructive response is not to pretend wars can be insured away. It is to build better risk-sharing systems. Governments should expand temporary public-private war-risk pools for strategic corridors like the Red Sea and Black Sea, so trade does not freeze every time premiums spike. Development banks and export-credit agencies should scale political-risk guarantees for housing, transport, energy, agriculture, and logistics, because reconstruction fails when assets cannot be underwritten. And firms should stop treating insurance as a back-office expense and start treating it as part of resilience planning, alongside supplier diversification and route redundancy. Ukraine examples show the model already exists; the problem is scale, not concept.

That is the real aftereffect of war in modern economies: it does not just destroy assets, it raises the price of moving, funding, and protecting them. Once insurance gets costlier or disappears, trade slows, investment waits, and recovery stalls. The policy task is to make risk more transparent, more shareable, and more insurable before the next conflict turns another corridor, sector, or country into an economic no-go zone.