Iran Targets Oil Tankers: Impact on Marine War-Risk Insurance
Earlier today, Iran reportedly targeted two oil tankers navigating the Strait of Hormuz under the escort of U.S. naval forces. According to Iran's Revolutionary Guard, the incident prompted four additional vessels to alter their routes to avoid potential attacks. This confrontation coincides with an ongoing conflict that has entered its sixth month, with the U.S. administration considering strategic responses.
Independent verification by American and British maritime security bodies has not yet been confirmed, and US Central Command challenges claims that Iran controls the crucial waterway. Nonetheless, the oil market reacted significantly, with Brent crude nearing $89.90 per barrel and West Texas Intermediate approaching $84.40. Earlier this week, Brent briefly exceeded $90, influenced by President Trump's declaration of a strong retaliatory stance following an assault that resulted in the deaths of American service members.
The incident greatly impacts the marine war-risk insurance market, where premiums had recently shown signs of easing. Previously, during peak crisis periods, premiums for passing through the Hormuz Strait surged to around 10% of a ship's hull value, only to moderate to 3% to 8%. These figures, as reported by Dylan Saunders-Mortimer of Marsh UK, still remain above the pre-war baseline of about 0.25%.
Market analysis highlights that premiums usually surge following attacks and recede slowly, if ever. Neil Roberts, head of marine and aviation sectors at the Lloyd's Market Association, explained that rates adjust with perceived risks. After a June memorandum between Washington and Tehran, premium rates showed a temporary downturn, but this week's events have reversed that progress.
In response to the escalating tensions, the U.S. International Development Finance Corporation deployed a maritime reinsurance facility to mitigate risks and ensure shipping continuity through the strait. Initially at $20 billion, the facility expanded to $40 billion with Chubb as lead underwriter, joined by AIG, Berkshire Hathaway, Travelers, Liberty Mutual, and Starr. By May, policies underwritten through this facility had not materialized as shipowners prioritized crew safety over available coverage.
These developments impact the broader insurance market beyond individual vessels. The Joint War Committee maintains a high-risk classification for the entire Persian Gulf, forcing reinsurers to face losses across multiple lines, including hull, cargo, energy infrastructure, and political violence. Howden Re analysts describe this as an uncommon multiline event applying pressure across different reinsurance sectors.
Iran's plans to administer its own toll regime through the Persian Gulf Strait Authority, sanctioned by the US Treasury, complicates risk assessment. Insurers await resolution to this dispute amidst ongoing uncertainty regarding potential ceasefire announcements. For U.S. insurers and brokers in marine, energy, or trade-credit within the Gulf, recent incidents have disrupted stabilization efforts, prompting abrupt premium increases, followed by gradual reductions. Domestic political dynamics, with declining public support for the conflict, further shape the government's response, influencing diplomatic and military strategies. Insurance practitioners are advised to approach rumored truce announcements cautiously, factoring in ongoing risks when considering coverage and pricing strategies.