Persian Gulf Shipping Crisis Sends Marine War Insurance Premiums Soaring
Marine war insurance in the Persian Gulf is facing major disruptions as premiums surge and insurers pull back coverage. The crisis is putting pressure on specialist underwriters while leaving well-diversified global firms largely unaffected. With roughly $22.5 billion of vessel value at risk, the industry could see losses exceeding $5 billion if large ships are declared total losses.
The most urgent risk centres on vessels passing through the Strait of Hormuz, a critical route for global energy supplies. Before the current crisis, about 20% of the world's oil and 20-25% of liquefied natural gas (LNG) moved through this waterway. The strait also handles around 30% of globally traded nitrogen fertiliser, making it a key chokepoint for international trade.
Insurers have responded by sharply increasing marine war risk premiums and reducing available coverage. Many have cancelled existing hull war policies or stopped writing new business in the region. This withdrawal is particularly concerning for US property and casualty insurers with heavy exposure to Gulf shipping routes.
If the Strait of Hormuz remains effectively closed for more than six months, the situation could worsen. Stranded vessels may lead to total loss claims, adding further strain. However, the US government has stepped in, offering up to $20 billion in rolling reinsurance capacity for hull, machinery war risk, and cargo insurance. This support helps limit extreme losses for participating insurers.
Elevated premiums are expected to last until at least the end of 2026, benefiting insurers that maintain selective exposure to the region. But the outlook varies by firm. Specialists with double-digit premium exposure to Gulf transit face the greatest pressure, with potential losses in policy volumes and earnings instability. In contrast, large, diversified re/insurers with marine war exposure below 5% of total premiumsāand strong capital reservesāare unlikely to face significant rating pressure.
The crisis has split the insurance sector into two groups: those with heavy Gulf exposure facing financial strain and those with diversified portfolios remaining stable. The US government's reinsurance backing provides some relief, but risks persist if shipping disruptions drag on. For now, higher premiums will support underwriting margins, but the long-term impact depends on how quickly normal transit resumes.
