Insurance rates for ships traveling through the Strait of Hormuz have surged to between 1% and 1.5% of a vessel’s insured value, up from 0.25% before the recent escalation of conflict in the region, according to the broker Marsh.
The increases come as roughly 500 oil and gas tankers, 500 container ships, and six cruise ships remain stranded on either side of the strait, effectively halted by Iranian threats to attack any vessel attempting passage. Only 66 ships have transited the waterway since hostilities began, compared to a normal flow representing approximately a fifth of global oil and seaborne gas shipments.
Lloyd’s of London, the world’s leading maritime insurance marketplace, has stressed it remains open for business, providing coverage for vessels in the Persian Gulf and Gulf of Oman, including the Strait of Hormuz. However, the organization last week extended the areas designated as “restricted,” requiring clients to notify insurers and agree on appropriate premiums reflecting the heightened risk.
The situation has prompted criticism of Lloyd’s, with accusations of cancelled policies and sharp price increases. Neil Roberts, head of marine and aviation at the Lloyd’s Market Association, explained that war insurance is provided by a dynamic market, with rates negotiated between underwriters, insureds, and their brokers to reflect changing risk profiles. “The current Gulf conflict is seeing market participants adjust from a relatively peaceful norm, to one where there are multiple strikes on vessels,” he said.
Donald Trump’s recent proposal for the U.S. To provide political risk insurance for seaborne trade in the Gulf initially suggested a potential gap in coverage. Lloyd’s has refuted this, stating that insurance is still available, albeit at significantly higher costs. Analysts at Jefferies have suggested that most ships currently in the Gulf have had their policies cancelled and reinstated at the new, elevated prices, with insurers likely excluding or separately charging for passage through the strait itself.
On Friday, the U.S. Government announced a $20 billion reinsurance facility to cover hull and cargo, excluding pollution risks from sunken ships, and stated it was collaborating with U.S. Insurers. However, analysts have expressed skepticism about the facility’s effectiveness.
The UK Chancellor, Rachel Reeves, revealed Wednesday that she is working with Lloyd’s, the U.S. Administration, and other allies to facilitate the reopening of the strait and ensure “vessels feel confident to travel through it, and that insurance products are available at right prices.” Reeves emphasized that the primary issue is not a lack of insurance products, but the safety of captains and crews.
Lloyd’s Chair Sir Charles Roxburgh echoed Reeves’ comments, reiterating the market’s confidence and continued support for international trade during the period of heightened risk. He affirmed Lloyd’s ongoing collaboration with UK, U.S., and international partners to ensure a “comprehensive response to the situation.”
President Trump’s announced plan to escort ships through the Strait of Hormuz and provide war risk insurance has been met with skepticism by the shipping industry, which is awaiting further details of the plan, according to Lloyd’s List.
