Insurance premiums on the Strait of Hormuz rise to 10% amid ongoing attacks on ships

Several sources in the maritime shipping market told Reuters’ insurance-focused service “The Insurance” that marine insurance premiums for transiting the Strait of Hormuz have reached 10% of the vessel’s value, marking the highest level recorded during the conflict so far, following attacks on commercial ships earlier this week.

The Islamic Revolutionary Guard Corps (IRGC) stated that two oil tankers “exploded” and were disabled after attempting to cross the strait via an “unsafe” route. It had announced on Sunday that two ships had been involved in what it described as an “incident” in the same area. It remained unclear whether there was a link between the two incidents.

One insurance source said on Monday that war risk premiums had risen to between 8% and 10% for transiting the Strait of Hormuz, while two other insurance sector sources said the rates had reached 10%.

A brokerage sector source concurred with reports that premiums had reached 10%, plus a no-claim bonus, while another source in the sector said they had reached around 7.5%. The first source noted that premiums reaching 10% represent the highest levels seen in the region during the conflict to date.

A second insurance sector source said shipowners were “hesitant” to accept the idea of paying such a large amount for passage.

Before the collapse of the temporary ceasefire between Iran and the United States, and the subsequent resumption of attacks on commercial ships, marine war risk insurance premiums for transiting the Strait of Hormuz had ranged between 1% and 3% of the vessel’s value.

The rise in premiums was accompanied by some insurance companies suspending quotes for passage, while others specializing in war risk insurance advised shipping companies to suspend their voyages through the Strait of Hormuz.

The Yemeni Houthi group, allied with Iran, announced today an immediate ban on maritime navigation to Saudi Arabia.

One insurance sector source said the market would have to wait to see what this ban meant in practice, given that the past few months had often seen Houthi threats without any action taken.

Another insurance sector source said insurance costs in the Red Sea had risen from 0.3% to 0.75% following the Houthi announcement.