London, United Kingdom – Web Desk: War risk insurance premiums for commercial shipping have surged sharply as escalating tensions in the Middle East threaten one of the world’s most critical maritime routes, the Strait of Hormuz.
According to industry officials, Iranian threats targeting vessels transiting the strategic waterway have driven up the cost of insurance that underpins the global shipping and freight industry, raising concerns over supply chain disruption and energy security.
The crisis follows a widening regional conflict triggered by U.S. and Israeli military strikes on Iran, which has significantly reduced traffic through the strait—a vital corridor handling nearly 20% of global oil and gas shipments.
Insurance Still Available, But Costly
Despite the heightened risk, marine insurers continue to offer coverage. However, many providers issued cancellation notices shortly after hostilities escalated in late February, allowing them to reassess and reprice policies under significantly higher risk conditions.
The International Union of Marine Insurance emphasized that such notices do not necessarily terminate coverage, but enable insurers to reintroduce policies with revised terms.
Industry experts in London—the world’s leading maritime insurance hub—said declining vessel traffic is primarily driven by safety concerns rather than a lack of insurance availability.
The Lloyd’s Market Association noted that ship operators are prioritizing crew safety amid fears of potential attacks in the region.
Premiums Spike to Record Levels
War risk premiums, which previously accounted for less than 1% of a vessel’s insured value, have surged dramatically. Insurers now quote rates ranging between 1% and 10% of a ship’s hull value for a single transit through the strait.
For high-value vessels such as liquefied natural gas carriers, this translates into insurance costs running into tens of millions of dollars per voyage.
Marine insurance brokers say premiums are fluctuating rapidly, reflecting the volatile security environment. Cargo insurance costs have also risen in parallel, further increasing the financial burden on global trade.
Complex Insurance Requirements
Shipping operators typically rely on multiple layers of coverage, including hull insurance for vessel damage, protection and indemnity (P&I) for third-party liabilities, and cargo insurance.
War risk coverage is generally purchased annually, but vessels entering high-risk “listed areas” such as the Gulf must secure additional short-term policies at significantly higher rates.
The Lloyd’s Market Association recently expanded its list of high-risk zones in the Gulf region, enabling insurers to adjust pricing more rapidly in response to evolving threats.
Declining Uptake, Rising Risk
Market participants report that fewer shipowners are purchasing coverage for Hormuz crossings, with some estimates suggesting uptake has fallen below 1%.
Insurers have also tightened timelines for policy acceptance, reducing the decision window from 24 hours to just 12 hours for vessels entering the high-risk zone.
US Intervention and Outlook
The United States Department of the Treasury has announced plans for a new shipping insurance framework aimed at supporting safe transit through the strait, potentially backed by naval escorts.
U.S. President Donald Trump has urged allied nations to participate, although international support remains limited amid ongoing hostilities.
Analysts say that if a secure maritime corridor backed by military protection is established, insurance premiums could decline rapidly. Until then, the cost of navigating the Gulf is expected to remain exceptionally high, with significant implications for global trade, oil prices, and economic stability.
