As the conflict in the Gulf widens, maritime insurance premiums for war coverage are surging dramatically, driving up the cost of moving energy through a critical maritime corridor. The conflagration sparked by Saturday's Israeli-U.S. air strikes against Tehran has paralyzed traffic through the Strait of Hormuz, a major shipping chokepoint. Iran on Monday said it would fire on any ship trying to pass, and at least nine vessels have suffered damage in the area since the conflict began.
War risk insurance allows ship owners to claim against any damage to their vessel or the cargo resulting from conflict or terrorism. Policies are typically annual, although some cover one-off voyages through risky waters, including war zones. The spike in premiums underscores how the war is raising costs for ship owners, traders and energy companies moving cargo through the Strait, adding to fears the conflict could stoke inflation if it goes on.
The hull war market has reacted more immediately due to the risk of large, concentrated losses if multiple vessels are hit in the same area. This is according to Stephen Rudman, head of marine, Asia, at global insurance broker Aon, who added that if the situation escalates materially, further rate correction is likely.
Additional premiums for vessels transiting high-risk waters are rising sharply and may continue to fluctuate in the short term,
The surge in maritime insurance premiums highlights the escalating risks and costs associated with shipping through the Strait of Hormuz, a critical global energy corridor.
