Maritime insurance premiums for war coverage have surged dramatically as tensions in the Gulf escalate, with some rates rising by more than 1,000%, significantly increasing the cost of transporting energy through a vital shipping corridor.
The crisis erupted following Saturday’s joint Israeli-U.S. air strikes against Tehran, which have effectively paralysed traffic through the Strait of Hormuz, a crucial chokepoint for global oil shipments. Iran warned on Monday that it would fire upon any vessel attempting to pass, and at least nine ships have reportedly sustained damage since the outbreak of hostilities.
War risk insurance, which protects ship owners against losses to vessels or cargo caused by conflict or terrorism, is typically issued on an annual basis, although some policies cover single voyages through high-risk waters. The sudden spike in premiums highlights the financial strain on ship owners, energy traders, and other commercial operators navigating the Strait, raising concerns that prolonged disruption could fuel inflation, analysts warn.
“The hull war market has reacted more immediately due to the risk of concentrated losses if multiple vessels are struck in the same area,” said Stephen Rudman, Head of Marine, Asia, at global insurance broker Aon. He added that further rate adjustments are likely should the situation escalate.
Premiums for vessels transiting high-risk areas continue to fluctuate, while cargo war risk rates are also being reassessed on a voyage-by-voyage basis, particularly for oil and bulk commodities. Jefferies analysts estimated potential industry losses from the seven reported damaged vessels at up to $1.75 billion as of 5 March.
| Parameter | Pre-Conflict Rate | Current Rate | Example Vessel Value | Implied Premium |
|---|---|---|---|---|
| Hull war insurance | 0.25% | 3% | $250 million | $7.5 million |
| Typical cargo war risk | 0.5–1% | 1–1.5% | $200–300 million | $2–4.5 million |
Insurance brokers note that rates vary daily depending on vessel type and specific risks, including position relative to the Strait of Hormuz. Despite the volatility, coverage remains available.
More than 20 million barrels of crude, condensate, and fuel passed through the Strait daily last year, approximately one-fifth of global oil consumption. Sheila Cameron, CEO of Lloyd’s Market Association, confirmed that roughly 1,000 vessels — half of them oil and gas tankers — with a combined hull value exceeding $25 billion remain in the region, predominantly insured in the London market.
In response, the U.S. administration is exploring measures to restore shipping flows and reduce oil prices, including potential naval escorts and political risk insurance for maritime trade. Analysts, however, remain uncertain about the scope and effectiveness of such interventions, warning that many ship owners may simply reinstate coverage at elevated rates.
Dr Michel Léonard, chief economist at the Insurance Information Institute, summarised the situation: “It’s like insuring a burning building — premiums reflect the extreme risk.”