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Lloyd’s of London has said it will “still provide cover to basically anyone who asks” as the insurance market hits back at criticism over cancelling policies and raising prices for ships stuck in the Gulf.
Insurance prices have soared 12-fold for ships seeking to transit through the Strait of Hormuz, where shipping has slowed to a standstill. In response, the US government has said it will provide up to $20bn of reinsurance cover to backstop the market and restart trade.
However, Lloyd’s head of underwriting Patrick Davison said the slowdown in vessel traffic was “not an insurance issue — it’s a question of vessel and crew safety”.
He told the FT: “All the insurers at Lloyd’s are still quoting business, and will still provide cover to basically anyone who asks.”
On Monday, Lloyd’s chair Sir Charles Roxburgh met UK chancellor Rachel Reeves as insurers at the market sought to fend off criticism for cancelling shipowners’ policies and raising prices for a single voyage in the region into the hundreds of thousands or even millions of dollars.
Reeves is said by colleagues to agree with Lloyd’s that there is “not really a problem with insurance” in that cover is still available. They added that she argued the priority must be to de-escalate the conflict to ensure crew safety in the region.
A proposal by US President Donald Trump to provide insurance to backstop trade through the Gulf has raised speculation over Lloyd’s ability to provide cover for ships in the region.
However, senior London market figures argued that the Middle East conflict was a growth opportunity for Lloyd’s insurers. Markets such as political violence have experienced a surge in demand from data centres and other infrastructure across the Gulf region.
London market insurers have defended the decision to cancel policies for ships sailing into the Gulf. They said that higher prices reflected heightened physical risk faced by ships and crews as well as elevated oil prices increasing a vessel’s insured value — rather than price gouging or a shortage of capital.
Shipping through the strait has in effect been blockaded because of threats by Tehran to strike any vessels that sail through the waterway, part of the expanding conflict triggered by the US-Israel attacks on Iran this month.
Oil prices have surged, meanwhile, with Brent hitting almost $120 a barrel on Monday before falling back to about $85 on Tuesday.
Last week the FT revealed the US Development Finance Corporation’s plans to create a $20bn reinsurance facility to restart maritime cargo and oil commerce.
Senior London insurance figures said they had learned of the US plan from a Trump post on Truth Social and that they were lacking detail about it. Some doubted that the facility would be set up.
Several figures said additional cover was not needed but that the industry would welcome a US taxpayer-funded subsidy that could be partly passed on to shipowners and investors if shipping through the strait resumed.
While insurers were still offering war risk cover for individual ships, one person added that it was not clear whether or how the industry would cover a convoy escorted by the US military.
They also said Development Finance Corporation backing may help ensure such a scheme could obtain insurance coverage.
“Would the market insure, potentially, a convoy of 20 oil tankers in one go? Is there appetite or not? I don’t know, because that hasn’t been tested yet,” the person said. “That’s where the DFC could potentially help.”