The recent escalation of conflict in the Middle East has brought shipping in the Strait of Hormuz to an almost complete halt, leaving the marine insurance industry working hard to keep coverage available amid rising risks. The trouble began on February 28 when the US and Israel launched strikes on Iran. Iran responded with missile and drone attacks across the Gulf, disrupting a key shipping route that handles about 20% of the world’s oil.
Since then, several ships have been damaged and at least one crew member has lost their life. Around 150 vessels remain stranded in the area. In response, multiple Protection & Indemnity (P&I) clubs, such as Gard, Skuld, NorthStandard, the London P&I Club, and the American Club, have issued notices canceling war risk insurance from March 5 onward.
Despite this, industry leaders assure that war risk insurance is still available. Chris Jones, CEO of the International Underwriting Association (IUA), explained that insurers have robust risk management strategies and are working closely with security consultants to advise on high-risk zones. He confirmed that, although the Persian Gulf is a high-risk area, coverage for ships passing through the Strait of Hormuz remains an option.
The aviation industry is also closely monitoring the situation. Insurers are cooperating with brokers and airlines to support flights as long as safety can be guaranteed.
The International Union of Marine Insurance (IUMI) issued a cautious warning about short-term disruptions to supply chains in the Middle East. They confirmed that war risk cover can still be purchased on a single-voyage basis, as long as the voyage has government and flag state approval. A cancellation notice from insurers doesn’t always mean coverage ends, and war risk insurance is still offered to those who want it.
Costs for war risk insurance have surged dramatically. According to Marsh, rates jumped from around 0.25% to 1.25% of a vessel’s value within a week. For a $100 million tanker, this means the insurance cost per trip rose from roughly $250,000 to over $1 million.
The conflict has also impacted container shipping. Jeremy Nixon, CEO of Ocean Network Express, says about 10% of the global container fleet is currently stuck because of the bottleneck. Linerlytica reported over 130 container ships, with a total capacity of 458,000 TEU, trapped in the Persian Gulf recently.
Global oil prices and shipping rates have reacted sharply. Brent crude jumped as much as 13% to $82 a barrel after the strikes, while freight rates for very large crude carriers reached a new high of over $420,000 per day.
Financial analysts at JPMorgan estimate that vessels in the Gulf require insurance coverage worth up to $352 billion, a figure much higher than what current private insurance markets can provide.
For now, the marine insurance sector is closely watching the situation, trying to balance the rising risks with the need to keep global trade moving through one of the world’s busiest and most vital waterways.