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Denmark has proposed substantial amendments to its War Risk Insurance Act for its merchant fleet. These implement NATO recommendations made in light of the security risks exposed by Russia’s actions after the invasion of Ukraine. The bill would allow all Danish-registered vessels to be covered by the Danish War Insurance Institute, extend its cover to P&I risks, create a DKK 6bn state loan facility for rapid claims liquidity, and permit delegation of administrative tasks to P&I clubs. For shipowners, this will – in the event of war – imply new contributions paired with enhanced war risk protection.
The legislation governing war insurance for Danish ships dates back to the War Risk Insurance Act of May 1939, which established the War Insurance Institute for Danish Ships (in Danish: “Krigsforsikringsinstituttet”) to protect shipowners against war-related risks[1]. It was sadly a timely amendment as Denmark was occupied by Nazi Germany only months later.
Following certain amendments after the war, the current framework was put into place by the institution of a new War Risk Insurance Act in 1997[2]. The Act allows for the Minister of Commerce to establish a War Insurance Institute for Danish Ships in the event of war involving the Kingdom of Denmark, to provide enhanced war risk cover to Danish vessels. The Act does, however, have certain limitations, which mean that it does not ensure full cover in times of war.
The 1997 Act has only been modified slightly subsequently[3] but the government has now – with a bill presented before Parliament on 8 October 2025 – presented fundamental changes to the Act[4].
The changes have been made further to recommendation from NATO in light of the enhanced security threats exposed by Russia following the invasition of Ukraine. Specifically, NATO has highlighted the need for operational merchant fleets for all the NATO member states in the event of a major war involving NATO and thereby Denmark. The amendments proposed by the government are thus intended to ensuring that the Danish War Insurance Institute remains operational both financially and in terms of insurance coverage, and that the Institute can support shipowners where the standard private based war risk insurance may not provide sufficient cover.
The main amendments to the Act are set out below.
Currently, the War Risk Insurance Act applies mainly to Danish-owned vessels under Danish flag (i.e. which are registered in the Danish International Ship Register (“DIS”) or the Danish Ordinary Ship Register (“DAS”). This entails that foreign owned vessels which are registered in Denmark, as well as foreign bareboat-registered vessels are not subject to the Act. The proposal solves this by extending the Act to these vessels, thus ensuring that basically all vessels which are registered in Denmark will be covered by the Act and, consequently, by the War Insurance Institute, irrespective of ownership, in the event the government decides to activate the War Insurance Institute.
The War Risk Insurance Act currently covers onlywar risk for Hull & Machinery (H&M) – i.e. relating to damage to the vessel itself. There is, as a matter of Danish law, no statutory war risk protection for Protection & Indemnity – i.e. for third party liability relating to crew, passengers, cargo, pollution damage or wreck removal. These risks are ordinarily insured via mutual P&I clubs, which may or may not cover war risk as part of the cover provided to the shipowners.
As noted in the preparatory works to the government’s proposal, it is customary for the war risk insurance provided by the P&I clubs that cover can be terminated within seven days from the outbreak of a major war involving the great powers. This will, in effect, mean that many vessels will lose the P&I cover, and thereby removing the necessary protection for the shipping companies and other vessels interests that undertake critical transport services globally at time of war.
On this basis, the Act will, under the government’s proposal, extend the cover to P&I risks in addition to the existing H&M cover, in respect of war risks. The policy terms are to be drafted by the board of the War Insurance Institute and approved by the government. In any event, the intention is that the War Insurance Institute will not provide cover in the instance where the shipowner is not liable (as e.g. the case under the Civil Liability Convention applicable to tanker oil pollution[5]) but will provide cover which are ordinarily covered by the standard P&I insurances.
The new proposal introduces a state loan facility of DKK 6 billion to ensure liquidity for the Danish War Insurance Institute upon its activation by the Minister. This facility will enable the Institute to pay out claims from day one, which is crucial for maintaining the operational capacity of the Danish merchant fleet and securing supplies to Denmark, the Faroe Islands, and Greenland.
The proposal allows for the administration of the Danish War Insurance Institute to be delegated to private insurance companies – likely P&I clubs – subject to approval by the Minister. The rationale is that these insurance companies typically have established 24-hour response teams, global offices, and extensive networks of business partners, which are necessary to ensure efficiency in the event of an incident. According to the government, it would not be feasible for the state to establish such an organisation with sufficient speed. Delegating administration to private insurance companies – likely one or more international P&I clubs – will thus ensure that ships and owners receive the necessary assistance promptly, regardless of their location worldwide.
In the event of a large-scale war and activation of the Danish War Insurance Institute, the shipping companies will be required to pay contributions for Protection & Indemnity liability in addition to the existing contribution for Hull & Machinery insurance. However, the increased contribution will be offset by the insurance coverage provided in the event of damage or liability. For the P&I clubs, it is relevant to assist the government in operating the institute, as is now possible under the Act.
The bill is expected to be soon passed in parliament and enter into force shortly thereafter.
[1] Act no. 183 of 4 May 1939 (in Danish: “Lov om danske skibes forsikring mod krigsfare”).
[2] Act no. 387 of 10 June 1997 (in Danish: “Lov om krigsforsikring af skibe”).
[3] Act no. 1174 of 19 December 2003 and Act no. 1432 of 21 December 2005.
[4] Proposal no. 11 of 8 October 2025.
[5] Civil Liability Convention, 1992, Art. 3 (2) (a), providing that the owner of the tanker vessel is not liable if he proves that “the damage (a) resulted from an act of war, hostilities, civil war …”.