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Strikes at Hormuz drive war-risk premiums higher for tanker insurers
One $100 million tanker can face war-risk insurance costs of up to $10 million per transit as hull premiums for Strait of Hormuz routes have spiked to as high as 10% of vessel value.
Insurance Business reports that renewed US-Iran exchanges at the Strait of Hormuz have intensified stress in the war-risk insurance market, where claims are already running above the sector's entire annual premium volume.
The latest round follows BBC reporting that US Central Command struck rocket launchers and sea mine infrastructure on Larak Island, which sits directly on the strait's shipping lane near Bandar Abbas, Iran's primary Gulf port. Iran's Islamic Revolutionary Guard Corps said the strikes killed two people and injured two others, and Iran later responded with ballistic missiles aimed at US bases in Jordan, where Jordanian authorities said all eight inbound missiles were intercepted.
Coverage costs have surged as transit volumes have fallen to roughly 3% to 5% of pre-war levels, after being about 20% of the world's oil and liquefied natural gas flows through the strait before hostilities began. Before the February 28 strikes, hull war-risk premiums for strait transits were about 0.25% of hull value, rising to peaks of up to 10% of vessel value, and S&P Global reported in late July that premiums were between 7.5% and 10% of hull value for affected voyages.
The article says Larak's position at the strait's narrowest navigable point makes it a more material risk for underwriters, who price coverage voyage by voyage under the Lloyd's Joint War Committee's Additional Premium mechanism. Neil Roberts of the Lloyd's Market Association said in July there is sufficient capacity with cover available, but at a price reflecting risk, and the war has generated between $2 billion and $3 billion in market-wide claims across war, terror, and political violence coverage.
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