Rising hostilities around the Strait of Hormuz have triggered an unprecedented surge in marine insurance costs and created extraordinary complexity in claims handling, according to industry experts, with war-risk premiums now reaching as high as 5% of vessel value.
Marine claims consultancy WK Webster has been managing cargo claims from vessels operating near the strait and reports that the "complexity" of these claims is "continuing to increase." Such claims typically involve Hull, Protection and Indemnity (P&I), and Cargo insurance, but WK Webster highlighted that vessels in the region have suffered not only explosion and fire damage, but assets deployed to assist have also been targeted by military strikes.
The consultancy noted that war-risk insurance has faced "widespread cancellation" across the market, forcing carriers to fundamentally reassess their willingness to accept transits through conflict-affected regions where crew safety risks have reached critical levels.
While war-risk insurance remains technically available—particularly in the London market—industry sources confirm that dramatic rate increases have fundamentally altered voyage economics. Premiums that previously averaged 0.2-0.25% of vessel value have now climbed to between 1% and 5%, with some reports indicating rates as high as 10% for certain vessels. For a tanker valued at $200-300 million, this translates to insurance costs of $2-7 million per voyage, compared to roughly $500,000-$750,000 before the conflict began.
WK Webster CEO Anthony Smith emphasized that in this high-risk, high-cost environment, effective claims management has become "especially vital."
"While hostilities continue to escalate, we will continue to see impacts widening and losses increasing," Smith stated. "We are prepared for challenges in deploying surveyors or other experts to certain claims locations or emergency situations. Our global network of local agents ensures that we can respond to and investigate claims thoroughly as they arise."
Ellis Morley, divisional director at insurance broker Howden, confirmed that while insurance remains available, it has become significantly more expensive and complex to navigate.
"There were some contrary views in the media last week around the 'uninsurable' nature of vessels and cargo in the region, which frankly isn't the case," Morley said. "Obviously, it's an incredibly high-risk scenario at the moment and, just because the insurance is available, does not mean vessels should—as Trump said—'run the gauntlet'."
He explained that war coverage for vessels prior to the conflict was provided at "very, very low rates," but most contracts allowed for cover to be cancelled with short notice—initially seven days, then reduced to 72 hours by many P&I clubs—and reinstated at dramatically different pricing.
"Cargo owners that had the grace period could, if possible and if safe, move their assets out of the high-risk area with no additional cost from the insurance side," Morley noted. "That window has now elapsed, so there is now a heightened rate environment."
Michael Hird, COO at WKW, said delays to cargo, additional freight charges, and vessels invoking the right to deviate or deploy force majeure clauses should be expected.
"This means increased costs for cargo movers and the potential for shipments landing at unintended ports, with cargo then needing to be on-carried to final destinations," he explained. "We will see more frequent losses for time-sensitive cargo, production downtime, breakdowns in supply contracts, and stock accumulation or shortages."
The crisis has already severely disrupted shipping flows. Tanker traffic through the Strait of Hormuz has fallen by over 90% from normal levels, with approximately 400 vessels anchored outside the waterway rather than attempting transit. Major carriers including MSC, CMA CGM, and Hapag-Lloyd have suspended operations or rerouted services around the Cape of Good Hope.
Meanwhile, ocean carrier Maersk announced it was adding an emergency freight rate of $1,800 per TEU on cargo from or destined to ports in Iraq, Kuwait, Saudi Arabia (Dammam & Jubail), Bahrain, Qatar, the UAE, and Oman (except Salalah).
"We are implementing this emergency freight rate to arrange alternative routing to final destination, including finding potential storage solutions, additional charters, and so forth," the carrier explained. "This fee includes transportation from temporary storage to final destination, when safe to complete the voyage."
The U.S. government has responded by directing the International Development Finance Corporation (DFC) to provide a $20 billion reinsurance facility to help stabilize the market, though details remain unclear and private insurers continue to await clarity on potential partnerships. President Trump has also suggested the U.S. Navy could begin escorting oil tankers through the strait.
