Marine Insurers Bump Up Premiums Amid Rising Threats
The cost of insuring vessels navigating the Strait of Hormuz has soared by more than 60% in recent days, according to figures from Marsh McLennan. This increase reflects the deteriorating security environment around one of the world’s most critical maritime corridors. Typical premiums have risen from 0.125% to approximately 0.2% of vessel value, meaning insurance for a $100 million ship now costs around $200,000 for a single passage through the Gulf region.
The reassessment follows the escalation in hostilities between Israel and Iran, whose consequences are reverberating beyond the battlefield. While direct missile strikes on commercial vessels have not yet occurred in the Arabian Gulf, market participants are factoring in a broader spectrum of risk, including misdirected munitions, cyber disruption, and opportunistic attacks by proxy forces. “The rating shift reflects more than just physical peril,” said Marcus Baker, global head of marine and cargo at Marsh. “It’s about the uncertainty premium – the price of not knowing when, or how, the next escalation may unfold.”
The Strait of Hormuz, which lies between Iran and Oman, funnels nearly a fifth of the world’s petroleum supply daily. Recent developments have magnified the region’s fragility, including a collision between two tankers, the Adalynn and Front Eagle, just east of Khor Fakkan. Although all crew were rescued and there’s no evidence of hostile involvement, the incident underscores the vulnerabilities faced by commercial shipping in tense geopolitical theatres.
Insurers are recalibrating their risk appetite as war risk policies yield windfalls when conflict is contained but expose underwriters to catastrophic losses when control is lost. “There are always carriers who will exit and others who step into the breach,” Baker noted. Cargo rates, particularly for oil shipments, are expected to follow suit, albeit more slowly. The situation is being closely monitored by London and Lloyd’s syndicates, particularly as reinsurance renewals approach.
The increase in regional volatility coincides with the United States repositioning naval assets in the Arabian Sea to deter Iranian aggression and reassure allies. Defence think tanks have warned about the threat of a formal closure of the Strait of Hormuz, which could trigger a far-reaching energy crisis. For now, shipping continues cautiously through the strait, but the accumulation of military pressure points and tactical uncertainty is testing the market’s resilience.
