Ship, Cargo War Insurance Surge Amid Middle East Tensions

By Harizah Hanim Mohamed

KUALA LUMPUR, March 2 (Bernama) – The global maritime industry is closely monitoring rising tensions in the Middle East, with hull insurance and cargo war risk coverage skyrocketing in response to the current situation.

Singapore-based Aon Asia head of marine, Stephen Rudman, said marine war risk underwriters have reacted swiftly to the heightened geopolitical turbulence, with additional premiums (APs) for the hull war cover on vessels transiting high-risk waters rising sharply -- a trend that may continue to fluctuate in the short term.

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“Cargo war risk coverage, which protects goods on board, remains available, but rates are increasing and quotes are being reviewed on a voyage-by-voyage basis, particularly for energy and bulk commodity trades,” he told Bernama when contacted today.

He added that based on observations, the actions taken by insurers include issuance of formal notices of cancellation under standard seven-day war clauses on certain annual hull war policies, as well as withdrawal or revision of existing quoted APs for transits through listed high-risk areas.

“Other primary actions we observe are reinstatement of coverage being offered at materially increased rates and heightened underwriting scrutiny for voyages into or near sensitive zones, including potential requirements for prior approval,” he said.

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Rudman noted that this activity relates specifically to war risk extensions, while core hull and machinery and protection and indemnity (P&I) covers remain in place.

He noted that despite the escalated tension, there is no systemic withdrawal of capacity. However, the market is repricing to reflect the elevated risk profile and reinsurance constraints.

“Should the situation escalate materially, such as sustained state conflict or significant vessel loss, further rate correction is likely,” he added.

According to media reports, insurance premiums/price has shot up by more than 50 per cent, while some have cancelled policies. However, there has not been any official confirmation from the service providers.

Meanwhile, multiple international maritime organisations have advised ships and vessels to avoid areas affected by the United States (US)-Iran conflict.

Malaysia Shipowners’ Association and Federation of ASEAN Shipowners Association president, Mohamed Safwan Othman said many ships are avoiding the Arabian Sea and rerouting via the Cape of Good Hope in southern Africa.

“Similar to past conflicts, vessels are expected to take longer alternative routes to steer clear of the affected areas,” he said.

The US and Israel’s attacks on Iran have dramatically increased security risks to ships operating in the Persian Gulf and adjacent waters, while the world awaits retaliatory moves by Iran.

The Strait of Hormuz, one of the world’s most vital maritime routes, has seen a significant drop in traffic, with multiple vessels turning around in the Gulf of Oman and the Strait itself.

The International Maritime Organisation (IMO) secretary-general Arsenio Dominguez has issued a statement urging all shipping companies to exercise maximum caution.

“Where possible, vessels should avoid transiting the affected region until conditions improve,” he said.

Back home, the Malaysia Marine Department (JLM) has issued an advisory urging all Malaysia-registered vessels and local shipping companies to exercise caution, including avoiding transit through the Strait of Hormuz until further notice.

JLM said this is to ensure navigational safety in view of the developments in the Middle East conflict, emphasising that Malaysian ship operators should reassess and, where necessary, replan their sailing routes based on the current security conditions.

However, Mohamed Safwan said that for now, there is no immediate impact on ships in Malaysian waters and this region due to Iran’s decision to close the Strait of Hormuz.

“We only expect immediate supply chain disruption from delays in ship arrivals if the conflict is prolonged,” he added.

Danish shipping company Maersk has announced the suspension of vessel crossings in the Strait of Hormuz following reports of the strait’s closure after the US and Israeli attacks on Iran.

It further stated that all vessels sailing from the Middle East–India to the Mediterranean and the Middle East–India to the US East Coast will be rerouted via the Cape of Good Hope until further notice due to the “deteriorating security situation”.

Similarly, the Mediterranean Shipping Company (MSC) has suspended “all bookings for worldwide cargo to the Middle East region until further notice”.

According to global maritime intelligence provider, Lloyd’s List, traffic across all sectors through the Strait of Hormuz dropped 38 per cent on Saturday, with 72 cargo-carrying vessels over 10,000 deadweight tonnage (dwt) transiting the chokepoint that connects the Middle East Gulf to the Arabian Sea/Indian Ocean.

-- BERNAMA