Insurers to cancel policies and raise prices for ships in Gulf and Strait of Hormuz

Insurers are cancelling war risk policies and sharply increasing premiums for ships transiting the Gulf and Strait of Hormuz following US and Israeli strikes on Iran and Iran's subsequent retaliatory attacks on US bases in the Middle East.

Brokers reported that war risk underwriters issued cancellation notices on Saturday for vessels in the region, with premiums expected to rise by up to 50% when markets reopen on Monday. This rapid action reflects the accelerated escalation of the conflict. Previously, Gulf transit premiums stood at approximately 0.25% of a vessel's replacement value. For a $100 million ship, that equated to $250,000 per voyage; the increase could push it to $375,000.

Premiums for calls at Israeli ports, formerly around 0.1%, face similar hikes as underwriters anticipate further Iranian retaliation.

Dylan Mortimer, marine hull UK war leader at broker Marsh, highlighted insurers' primary worry: potential closure of the Strait of Hormuz.

“If Israel and US are continuing to strike Iran, it’s more likely that Iran will start trying to leverage their control via the manipulation of shipping in the region,”

Underwriters are also factoring in risks of Iranian proxies boarding or seizing ships.Cargo war risk coverage for commodities like oil and grain faces parallel cancellations and repricing. Rather than outright refusals, insurers plan to renegotiate at elevated rates.

The Strait, through which roughly one-fifth of global crude oil passes, is seeing avoidance: at least three vessels diverted on Saturday amid heightened attack fears. Some ships reportedly received radio warnings from the Iranian Revolutionary Guard Corps indicating the strait was closed to shipping, according to advisory firm EOS Risk.