Escalating Hormuz tensions drive up Middle East war risk insurance costs, sources say
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War risk insurance premiums for shipments to the Middle East Gulf have jumped to 0.5 per cent in a week.
PHOTO: EPA-EFE
LONDON - US and Israeli attacks on Iran and Tehran's reprisals have doubled the price of insuring shipments to the Middle East and the Gulf in the last week, insurance sources said on June 23.
War risk insurance premiums for shipments to the Middle East Gulf have jumped to 0.5 per cent from around 0.2 per cent to 0.3 per cent a week ago, as risks grow to the critical Strait of Hormuz, the sources said.
The cost of a seven-day voyage is based on the value of the ship and the increase will add tens of thousands of dollars each day in additional costs.
While underwriters typically price risk and rates individually, the current 0.5 per cent level reflected rates on June 23, the sources told Reuters and The Insurer, a Reuters publication.
“The position (on rates) is subject to constant change,” said Mr David Smith, head of marine with insurance broker McGill and Partners.
Iran carried out a missile attack on a US airbase in Qatar on June 23 after the US bombed Iranian nuclear sites at the weekend.
The conflict has raised concerns Iran could close Hormuz, the strait between Iran and Oman through which around 20 per cent of global oil and gas demand flows.
That has spurred forecasts of oil surging to US$100 a barrel. Shipping rates for supertankers, which can carry two million barrels of oil, have also soared, more than doubling in a week to over US$60,000 (S$76, 700) a day, freight data shows.
War risk rates have hovered around the 0.3 per cent level in the Gulf for many months. Rates in the Red Sea area spiked to 1 per cent in 2024 after Iran-backed Houthis launched attacks on commercial ships which they said were in solidarity with Palestinians fighting Israel in Gaza.
War risk rates for Israeli ports have soared in recent days, quoted as much as 1 per cent.
London’s marine insurance market opted on June 18 not to widen waters around the Gulf deemed high risk, which is closely watched by underwriters.
“The listed areas have been left unchanged as ships calling or transiting most of the Middle East already have to notify underwriters, who can then assess such voyages on their merits,” said Mr Neil Roberts, secretary of the Joint War Committee, which comprises syndicate members from the Lloyd's Market Association and representatives from the London insurance company market. REUTERS
