Marine insurers seek solutions as Gulf shipping threats evolve

Marine insurers are exploring new ways to revive seaborne trades in the Persian Gulf as threats shift from the weapons of past tanker wars to drones and modern missiles even as US offers to backstop war-risk insurance meets a cautious response.

More than 10 ships have been targeted in the Strait of Hormuz and surrounding waters since the US-Iran war broke out Feb. 28, leading to crew casualties and ship damage, and international shipping organizations have called on shipping companies to avoid the conflict zones if possible.

"This situation is unprecedented. There is perhaps a tendency in some quarters to view this as a rerun of 1980s tanker wars, but that scenario was fundamentally different," Munro Anderson, director of strategy and operations at marine war risk insurance specialist Vessel Protect, part of Pen Underwriting, told Platts, part of S&P Global Energy, March 6.

"That said, there is no less of an obligation or a willingness on the part of specialist marine war insurers to be able to find mechanisms to support commercial trade."

The Shipowners' Club, one of the 12 members of the International Group of Protection & Indemnity Clubs that had rolled back coverage for third-party liabilities in wars, said March 5 that it's ready to reoffer war cover for limits up to $25 million.

Automatic Identification System signals showed that five vessels transited Hormuz on March 5, down from eight vessels the day before, data from S&P Global Commodities at Sea showed.

Last month, an average of 135 vessels per day navigated the strait -- a key waterway with daily flows of nearly 19 million barrels of oil and 10 billion cubic feet of LNG in normal times.

This de-facto blockage is boosting energy and freight rates. The Platts VLCC index for non-scrubber-fitted, non-eco vessels, ended March 6 at $471,158/day, up 127% from Feb. 27.

US pledges

Analysts said the US' recent proposal to provide insurance for vessels transiting the Strait of Hormuz is unlikely to restore cargo flows in the short term, as Iran's military capability to strike vessels remains the primary constraint, not insurance availability.

In its latest notice, the US-led Joint Maritime Information Center said operational risks are not confined to Hormuz approaches alone and recent reporting indicates a possible threat from limpet-style methodology in the northern Persian Gulf and Iraqi littoral operating area.

Speaking on Fox News late March 3, US Energy Secretary Chris Wright said commercial insurers would continue to provide the bulk of services to shippers after President Trump earlier pledged sovereign cover for Persian Gulf seaborne trades via the US International Development Finance Corp.

"Commercial markets do that, and they'll still do that," he said. "But we've offered to backstop, sort of be a reinsurer of the movement of these vessels."

When asked to comment on the US cover, a spokesperson for Lloyd's said the well-established marine insurance industry in London will work with the Development Finance Corp. to support shipowners.

Chinese reactions

Iran has claimed it is restricting passage through Hormuz only for vessels linked to Western nations and Israel rather than fully closing the critical energy chokepoint, but three shipping and two oil-trading sources in China told Platts they would only resume normal cargo operations with both insurance and Chinese navy escorts.

China, Iran's largest trading partner and the world's largest oil importer, relied on 55% of its crude imports and 50% of its LPG inflows from the Middle East in 2025, according to Chinese customs data.

The Chinese government has yet to comment on whether there would be any navy escort plants but called on all parties in the conflict to cease military operations.

"Irrespective of whether insurance is provided by the market or the US Government, shipowners will probably hold back from making trips through high-risk areas until there is some evidence of cessation or substantial reduction of hostilities out of worry not only for their vessel but also for their crew," Tom Wilson, CEO of Tysers Insurance Brokers, said in an emailed statement March 6.