ABSTRACT
Insurance underwriters face wide ranging risks and these become greater as ships become more sophisticated and more expensive to build and repair. When shipping becomes at risk because of a war, underwriters announce that a specific area has become a war zone and shipowners entering this zone are liable to pay an extra insurance premium. Liner operators faced with this extra cost, and it can be a sizeable amount, will generally seek to receiver the extra cost from shippers by introducing a temporary surcharge called a war risk surcharge. This is applied to the freight and can be expressed as a percentage or as an amount per container. The calculation which shipping lines have to perform under these circumstances is to estimate the revenue which they will earn and divide the additional premium into it in order to determine the level of the surcharge.When underwriters announce that an area is no longer officially a war zone, shipping lines will withdraw the surcharge.
