Insurance premiums for ships transiting the Strait of Hormuz remain at around 10%

Several sources told The Insurance Journal that war risk insurance premiums for transiting the Strait of Hormuz remain around 10%, as declining maritime traffic and ongoing attacks on commercial vessels continue to pressure the market, driving prices higher. Three sources in the marine insurance market estimated war risk premiums for the Strait of Hormuz at between 7.5% and 12.5%. A broker source stated that prices range from 7.5% to 10%, while an underwriting source indicated they are around 10%. Another underwriting source noted that it had raised offered premiums to 12.5% earlier last week, and a third underwriting source said there is no stable status quo in the strait because conditions change rapidly.

The broker source explained that the current operating environment is as difficult as it has been since the conflict began, citing compliance concerns in the Iran-controlled northern route and an increased frequency of attacks on ships using the southern route. He added that attacks on the southern route have become so frequent as to be almost expected and anticipated since the escalation of hostilities against commercial shipping in late July. This creates a self-reinforcing cycle of developments that drive prices higher: an attack undermines confidence in the operating environment, leading to higher premiums and a decline in transit volumes. The reduction in volume limits the premiums entering the market, imposing further upward pressure that could push prices to levels that are commercially unviable, thereby increasing pressures that further reduce transit volumes.

The broker source noted that this environment has led to volatility in the appetite of some insurers. Companies that previously offered 100% coverage have often reduced their quotas, while some insurers have shifted their capacity placement locations in the region around the Arabian Peninsula. Other companies are currently not offering services for the Strait of Hormuz. For ships wishing to transit the Iran-controlled northern route, there are significant compliance and sanctions concerns. One broker source said the market has not yet begun to promote or implement this clause, as legal teams at major brokerages and underwriting companies analyze its implications.

Oil prices rose for a third day, as prospects for a near-term resolution to the war between the United States and Iran dimmed after President Donald Trump said he was not interested in extending an expired agreement with Tehran. Brent crude rose above $91 per barrel after closing at its highest level since late July, while West Texas Intermediate crude was trading near $85 per barrel. The memorandum of understanding referenced by the US president was signed in June and technically expired on Monday.