Strait of Hormuz Risk Skyrockets: Collective Withdrawal of War Insurance, Oil Tanker Costs Surge Overnight

Caixin March 1 (Editor Zhao Hao) After the United States and Israel attacked Iran, insurance companies notified multiple oil tanker owners that policies for ships passing through the Persian Gulf and the Strait of Hormuz would be canceled, and coverage quotes would be increased.

Several brokers told media that war risk insurance providers sent cancellation notices to shipowners on Saturday (February 28), ending coverage for ships passing through this critical global oil choke point, and it is expected that premiums will rise by up to 50% in the coming days.

War risk insurers covering bulk cargoes such as grains and oil on tankers also said they are preparing to cancel related policies next Monday.

According to brokers, after canceling policies, insurance companies are expected to renegotiate coverage conditions at higher prices rather than completely refusing to insure ships entering the region.

Analysts believe that issuing cancellation notices before market trading resumes next Monday—this unusual move highlights the rapid escalation of the Middle East situation. On the same day, Iran claimed to have launched large-scale attacks on Israeli and U.S. bases.

Dylan Mortimer, head of Marine Hull War Insurance at Marsh, a Lloyd’s broker, said that previously, insurance prices passing through the Persian Gulf were about 0.25% of the vessel’s replacement cost, but now they could increase by as much as 50%.

This means that for a ship valued at $100 million, the insurance premium per voyage would rise from $250,000 to $375,000. According to the German Shipowners’ Association, the shipping industry is facing an “acute operational crisis.”

Mortimer added that ships docking at Israeli ports previously paid premiums of about 0.1% of the vessel’s value, which could now also increase by up to 50%, as insurers prepare for possible Iranian retaliatory actions.

He pointed out that insurers are most concerned about whether Iran will close the Strait of Hormuz. They are also factoring in the risk of Iran’s armed forces boarding and seizing ships.

Currently, some shipowners have begun to avoid the Strait of Hormuz. On Saturday, at least three ships turned back before reaching the strait, as owners reassess the risk of attack through this narrow waterway.

Iran’s Islamic Revolutionary Guard Corps announced that it has banned any ships from passing through the Strait of Hormuz. According to Iranian media, with ships ceasing to traverse the strait, it has effectively been closed.

Consulting firm EOS Risk also said that some ships received radio warnings believed to be from the Iranian Islamic Revolutionary Guard Corps, stating that the strait has been closed to shipping.

Mortimer said, “If Israel and the U.S. continue to strike Iran… Iran is more likely to exert influence by manipulating regional shipping.”