Maritime insurance premiums surge as Iran conflict widens

Published Fri, Mar 6, 2026 · 07:22 PM

[BENGALURU] As the conflict in the Gulf widens, maritime insurance premiums for war coverage are surging – in some cases by more than 1000 per cent – dramatically driving up the cost of moving energy through a critical maritime corridor.

The conflagration sparked by Feb 28’s Israeli-US air strikes against Teheran has paralysed traffic through the Strait of Hormuz, a major shipping chokepoint. Iran on Mar 2 said it would fire on any ship trying to pass, and at least nine vessels have suffered damage in the area since the conflict began.

War risk insurance allows ship owners to claim against any damage to their vessel or the cargo, resulting from conflict or terrorism. Policies are typically annual, although some cover one-off voyages through risky waters, including war zones.

The spike in premiums underscores how the war is raising costs for ship owners, traders and energy companies moving cargo through the Strait, adding to fears the conflict – which shows no signs of abating – could stoke inflation if it goes on, said analysts.

“The hull war market has reacted more immediately,” due to the risk of large, concentrated losses if multiple vessels are hit in the same area, said Stephen Rudman, head of marine, Asia at global insurance broker Aon, adding that if the situation escalates materially, further rate correction is likely.

“Additional premiums for vessels transiting high-risk waters are rising sharply and may continue to fluctuate in the short term,” he said.

Cargo war risk premium rates are also increasing, with quotes being reviewed on a voyage-by-voyage basis, particularly for energy and bulk commodity trades, he said.

Analysts at Jefferies estimated on Thursday (Mar 5) that potential industry losses from at least seven vessels reported damaged, at the time its note was published on Mar 5, could reach up to US$1.75 billion.

With most tankers valued between US$200 million and US$300 million, the new insurance rate of 3 per cent would imply a hull war risk premium of about US$7.5 million, up from around 0.25 per cent, or US$625,000, before the conflict began, the brokerage added.

Angus Blayney, marine divisional director at Gallagher, a major insurance broker, told Reuters this week that marine insurers in the London market are still offering coverage but that rates were rising, without providing a figure. Costs will vary depending on the vessel type, cargo and routing, he added.

Concentrated risk in the area

More than 20 million barrels of crude, condensate and fuels passed through the Strait daily last year on average, data from analytics firm Vortexa showed. About a fifth of the total oil the world consumes passes through the Strait.

“There remain approximately 1,000 vessels, about half of which are oil and gas tankers, with an aggregate hull value exceeding US$25 billion in the Persian/Arabian Gulf and surrounding waters,” Lloyd’s Market Association’s CEO Sheila Cameron said in a statement.

Cameron added that the vast majority of these vessels were insured in the London market and insurance “currently remains in place”.

At least 200 ships remained at anchor in open waters off the coast of major Gulf producers, Reuters reported on Mar 4.

Morningstar DBRS wrote in a note earlier this month that reinsurers may respond by raising the loss level at which their liability kicks in, or reducing capacity, “leaving primary underwriters retaining more risk and potentially pressure solvency levels.”

“Supply chains will be stressed as goods are rerouted via the Cape of Good Hope or overland routes, increasing transit times and costs,” it added.

Administration seeks solutions

The Trump administration is exploring ways to bring down oil prices by getting shipping routes moving again.

On Mar 3, President Donald Trump said the US Navy could begin escorting oil tankers through the Strait of Hormuz and added he had ordered the US International Development Finance Corporation to provide political risk insurance and financial guarantees for maritime trade in the Gulf.

He also met with global insurance broker Marsh to discuss the matter, the company said on Mar 4. A Lloyd’s spokesperson also said the company was engaging with the Development Finance Corporation and relevant stakeholders to find solutions.

But analysts said it remains unclear how the administration intends to intervene and whether any scheme would apply to ships and cargo of all nationalities. In the absence of an alternative, they expect many ship owners to reinstate their previous cover at a higher rate and absorb the costs.

“It’s like insuring a burning building,” Dr Michel Léonard, chief economist and data scientist at Insurance Information Institute, said. REUTERS