Full Breakdown
Surge in Ship Insurance Premiums Amid Strait of Hormuz Conflict
3/30/2026, 3:12:20 AM
Impact of the Iran War on Maritime Insurance
The ongoing conflict involving Iran has significantly disrupted maritime operations in the Strait of Hormuz, a critical passage for global oil and liquefied natural gas (LNG) supplies. Following the US-Israeli strikes on Iran, there has been a reported 95% drop in maritime traffic through the strait, prompting a dramatic increase in ship insurance costs. The International Union of Marine Insurance noted that some insurers are issuing "war risk termination notices" to reevaluate coverage terms, although this does not necessarily end existing policies.
Rising Insurance Costs
Before the conflict, war risk insurance premiums typically cost less than 1% of a vessel's hull value. Currently, these premiums can escalate to tens of millions of dollars for a single crossing. Estimates from industry experts indicate that premiums now range from 3.5% to 10% of the vessel's value, with fluctuations occurring almost hourly. For instance, a new LNG carrier valued at $200 million to $250 million could incur similar costs for its cargo.
Changes in Insurance Policy Requirements
In early March, the London marine insurance market expanded its "listed areas" to include more regions in the Gulf, allowing underwriters to respond swiftly to heightened risks. Ships entering these conflict zones must renegotiate their war risk premiums, which has become increasingly challenging. Currently, there is minimal demand for such policies, with reports indicating less than 1% uptake for insurance related to the Strait of Hormuz.
US Initiative to Mitigate Risks
In response to the escalating situation, US Treasury Secretary Scott Bessent announced an initiative aimed at facilitating safer crossings through the Strait of Hormuz, which includes potential naval escorts. Former President Donald Trump had previously advocated for this plan, urging Western nations to participate. Experts believe that if a militarily protected crossing framework is established and proves effective, insurance rates could decrease significantly.
Broader Economic Implications
The blockade of the Strait of Hormuz is expected to have far-reaching economic consequences. Marine insurance premiums in South Korea, for example, have surged over 1,000%, leading to increased freight rates that burden export companies. The Korea International Trade Association reported numerous cases of logistics difficulties, including shipping delays and rising costs. Financial authorities are preparing for the possibility of a prolonged conflict, which could negatively impact the financial health of domestic exporters and the broader market.
Criticism and Concerns from Affected Parties
Stranded sailors in the Gulf have expressed urgent concerns for their safety, with reports of operators ignoring requests to leave the area. Mohamed Rashidi from the International Transport Workers' Federation described the situation as "exceptional" and "truly shocking," highlighting the panic among sailors who feel trapped in a war zone. The UN's International Maritime Organization estimates that around 20,000 sailors are currently stranded, with at least eight fatalities reported since the conflict escalated.
Conclusion
The ongoing conflict in the Gulf region has led to unprecedented increases in ship insurance premiums and significant disruptions in maritime traffic. As the situation evolves, the implications for global shipping, insurance markets, and the safety of maritime personnel remain critical areas of concern.
