Lloyd's of London has warned of a growing insurance crisis in the Strait of Hormuz, where escalating Middle East conflict has effectively closed the crucial maritime channel for nearly three weeks. Over 100 gas and oil tankers and container ships usually pass through daily, but now an estimated 1,000 vessels and their crews are trapped in the Gulf, disrupting global flows of fuel, chemicals and goods.
According to analysts at Lloyd's List Intelligence, 23 vessels have been attacked since the start of the war, including near misses and those sustaining minor damage, with several crew members killed. War insurance premiums have soared from 0.25% of a vessel's value before the conflict to between 3.5% and 7.5%, compared with 1% to 1.5% a week earlier.
Despite the availability of cover at a price, brokers concede there has been little demand for insurance in the strait. David Smith, head of marine at broker McGill and Partners, said the 'fear factor' is preventing companies from moving their vessels, rather than the cost of insurance. Silke Lehmköster, fleet managing director at Hapag-Lloyd, reported that seafarers have seen drones, explosions and smoke, with one of the company's ships hit by shrapnel causing a small fire.
Richard Meade, editor-in-chief of Lloyd's List Intelligence, described a 'huge build-up of risk' in the area, noting that while ships at anchor were initially considered safe, attacks now appear to be aimed at sustaining the closure of the strait. Shipping companies have called for an end to escalation and clear guarantees from all parties before they will order crews to attempt transit.
The crisis marks the latest challenge for Lloyd's, which has insured maritime risks for over 330 years, from the sinking of the Titanic to the 9/11 attacks. Various measures to reopen the strait have been suggested, including a safe maritime corridor, naval escorts, or security guarantees from Iran, but no solution has yet been agreed.
