Reduced vessel traffic in the Strait of Hormuz is not because of insurance availability, but because of safety concerns, the Lloyd’s Market Association (LMA) has clarified in a recent statement.
The LMA stated: “Three weeks since the start of the hostilities in the Middle East, we are still seeing reports that suggest insurance coverage is cancelled or unaffordable and that this is the reason that vessels are not transiting the Strait of Hormuz. This is not accurate.”
LMA emphasised that war insurance is currently available to cover insureds from war perils, and it remains available within the Lloyd’s and London company market for vessels wishing to transit the Strait of Hormuz.
It noted that liability coverage through the P&I Clubs is non-cancellable and remains reinsured in the London market. A small number of fixed premium P&I covers for charterers were cancelled and mostly repriced.
In the marine war insurance market – which encompasses hull, cargo, and liability – shipowners’ contracts include a notice of cancellation.
This mechanism allows war risk premiums, which are typically very low, to be renegotiated when increased risk, such as the Ukraine war or Red Sea conflict, affects vessels trading in a heightened risk area.
“The hull war risk market has a well understood notification mechanism agreed between shipowners and insurers in their war contracts, which allows war premiums to remain very low in peacetime. In fact, such premiums are little more than notional: if applied, for instance, to an average family car, the cost would be under £1 for a year. This mechanism instead allows for premiums to be reassessed when risk increases,” the LMA explained.
In the week after the start of hostilities, the LMA conducted a survey of the main participants in the Lloyd’s marine war market, with the results indicating that 88% of them continue to have appetite to underwrite international (including US and UK) linked hull war risks.
The survey also highlighted a sustained appetite for international (including US and UK) linked cargo underwriting, with over 90% of participants expressing interest.
It was noted that premium terms would be determined by each syndicate’s individual appetite.
“The reason ships are not moving is not through a lack of insurance; it is a question of the risk to crew and vessel safety being assessed by the ship masters and owners as too high,” said analysts.
Since the conflict began, the Joint Maritime Information Center (JMIC) documented 23 maritime attacks involving commercial vessels and offshore infrastructure reported across the Arabian Gulf, Strait of Hormuz and Gulf of Oman.
According to Lloyd’s List intelligence, which tracks cargo vessels over 10,000 dwt, there were 111 recorded transits from the beginning of March up until late last week.
However, analysts suggest that this figure may be conservative, as it does not account for vessels that transited with their satellite tracking disabled.
“The incidents involve a wide range of vessel types and flag states, with no consistent pattern of ownership. Underwriters have already confirmed that a number of the non-sanctioned casualties are insured or reinsured in the London market and numbers will inevitably rise the longer the conflict endures,” LMA said.
Analysts like Morningstar DBRS have noted that the worsening security environment has significantly raised the stakes for commercial shipping.
The agency observed that while the market remains open, some insurers have tightened terms or limited cover for specific Gulf operations, leaving some shipowners with fewer insurance options.
Consequently, more vessels are anchored outside the strait as operators assess the potential for casualties, environmental disasters, and total asset loss.
