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Insurers told ship owners on Saturday they would cancel policies and raise coverage prices for vessels travelling through the Gulf and Strait of Hormuz after the US and Israel attacked Iran.
War risk insurers on Saturday submitted cancellation notices for policies covering ships moving through the key oil chokepoint, brokers told the FT, with prices set to rise as much as 50 per cent in the coming days.
The unusual move to submit these notices before trading resumes on Monday underscores the pace of escalation after Iran launched retaliatory strikes against US bases across the Middle East.
Insurance prices for ships travelling through the Gulf had been about 0.25 per cent of the replacement cost of a vessel. They could now jump as much as 50 per cent, Dylan Mortimer, marine hull UK war leader at broker Marsh, told the FT.
Insurance costs for ships calling at Israeli ports, which had been at about 0.1 per cent of the cost of a vessel prior to recent strikes, could also surge as much as 50 per cent, Mortimer said, as underwriters braced for retaliatory action by Iran.
The greatest concern among underwriters was whether Iran would close the Strait of Hormuz, Mortimer said. Insurers were also pricing in expectations that Iranian proxies may attempt to board and seize vessels, he added.
“If Israel and US are continuing to strike Iran . . . it’s more likely that Iran will start trying to leverage their control via the manipulation of shipping in the region,” Mortimer said.
Cargo war risk insurers — which cover commodities carried on tankers, such as grain and oil — also said that they were preparing to cancel policies on Monday, another broker said.
After cancelling policies, insurers were expected to renegotiate coverage at higher prices, brokers said, rather than denying coverage for ships sailing into the region.
Some ship owners are also turning away from the Strait of Hormuz, through which about a fifth of the world’s crude oil flows.
On Saturday at least three ships turned away from the strait, rather than pass through it, as shipowners assessed the risk of being attacked in the narrow waterway.
EOS Risk, an advisory firm, also said that some ships had received what appeared to be a radio warning from the Iranian Revolutionary Guard Corps that the strait was now closed to shipping.