Maritime Insurers Cancel War Risk Cover in the Gulf Region

Insurers Cancel War Risk Coverage for Vessels in Middle East Gulf Amid Escalating US-Israeli-Iran Conflict

Insurance companies have announced that they will be cancelling war risk coverage for vessels operating in the Middle East Gulf, following a statement from Iran’s Revolutionary Guard Corps (IRGC) that the Strait of Hormuz is “closed”. The move comes as the conflict between the United States, Israel, and Iran continues to escalate, with US and Israeli attacks on Iranian targets and retaliatory strikes by Iran against US assets in the region.

At least five tankers have been damaged, two personnel killed, and around 150 ships are stranded in the area. The disruption has caused oil prices to surge, with Brent crude futures increasing by up to 13% as multiple oil and gas shutdowns occur in the Middle East. Approximately 10% of the world’s container ships are affected by the broader backups, which could lead to cargo piling up at ports and transshipment hubs in Europe and Asia.

The IRGC stated that any vessel attempting to pass through the Strait of Hormuz would be set “ablaze”. The US-flagged product tanker Stena Imperative was damaged by aerial impacts while berthed in the Middle East Gulf, resulting in a shipyard worker’s death. Other tankers have also been hit, including the Honduran-flagged Nova and the Gibraltar-flagged Hercules Star.

Insurance companies, including Gard, Skuld, NorthStandard, the London P&I Club, and the American Club, have issued cancellation notices for war risk coverage, effective from March 5. This means that shipping companies with vessels in the region will need to seek new insurance cover at a higher cost. War risk premiums have risen as high as 1% of the value of a ship’s worth, adding hundreds of thousands of dollars to costs for every shipment.

Industry sources note that the war insurance market is facing a “de facto close” of the Strait of Hormuz, driven by perception of threat rather than a tangible blockade.

Source: Al Jazeera