The Strait of Hormuz has become a high-risk area for ships, with insurance premiums soaring due to the threat of attacks. The London market, which is the unofficial headquarters of the global insurance industry, has responded by increasing premiums and offering new policies.

Insurance Premiums Rise

According to David Smith, head of marine at London broker McGill and Partners, insurance underwriters are scrutinizing prices and individual risk factors following renewed strikes across the Middle East. Rates for ships passing through the strait have risen to as high as 10% of a vessel’s value, from roughly 0.25%-0.5% before the war.

For example, on an oil tanker worth $100 million, the insurance premium would be $10 million for a single voyage. Hull war rates, which cover a ship’s physical structure against damage or loss caused by conflict, have since pulled back to 1-3% of a ship’s value.

Impact on Ship Owners

Ship owners are facing significant challenges due to the increased risks and costs associated with transiting the Strait of Hormuz. Some underwriters are offering no-claims bonuses, returning half the premium to ship owners if their vessels sail through the strait without incident.

The Hormuz crisis is a high-stakes affair for insurers, with war insurance premiums tracking geopolitical events almost on an hourly basis. Underwriters want to price policies just six hours ahead of the voyage, down from the usual 24-48 hours, and policies are valid for just three to seven days before needing to be renegotiated.

Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.