The Lloyd’s of London insurance market will continue to provide cover for vessels traveling through the Strait of Hormuz even as shipowners avoid the area, according to chief executive officer Patrick Tiernan.
Shippers seeking insurance for tankers going through the strait “is pretty rare at the moment because people are focused on safety and security,” Tiernan told Bloomberg Television in an interview on Thursday.
Shipping through the Strait of Hormuz — which carries about a fifth of global oil flows, as well as gas, fertilizer and other products — has effectively ground to a halt since the US and Israel launched the war against Iran on Feb. 28.
While the Lloyd’s Market Association has said insurance for ships in the region is still available, maritime cover premiums have spiked as Iran threatens to target vessels crossing the passage. People familiar with the matter said on Monday that the cost of coverage has surged to about 5% of the value of a ship, roughly five times the level seen in the earliest days of the Iran war.
“In maritime war risk, there’s more real-time, dynamic pricing,” Tiernan said. “You may see spikes and you may see prices drop off pretty quickly.”
Premiums in such segments tend to rise sharply during crises but remain relatively low in peacetime, Tiernan said, adding that marine war risk remains a relatively small part of the broader insurance industry.
“Cover remained and remains in place but can now be reviewed on a case-by-case basis reflecting the perception of risk,” the LMA’s Joint War Committee said in a website note Thursday. There have been more than 25 attacks on commercial tonnage, it also said.
The US International Development Finance Corp. said on March 11 it’s partnering with insurer Chubb Ltd. on a $20 billion reinsurance backstop aimed at reviving shipping in the strait. (Editor’s note: Moody’s Ratings said the reinsurance plan is unlikely to resolve the shipping blockade in the Strait of Hormuz because it excludes liability cover).
UK Chancellor of the Exchequer Rachel Reeves last week met with Lloyd’s Chair Charles Roxburgh to discuss maritime insurance to facilitate the continued passage of ships through the Strait of Hormuz, and that the UK is willing to play its part in using its oil reserves to help reduce the price of oil.
“There is a role for the public and private sector to work together,” Tiernan said Thursday. “We do try to make sure we have those conversations in private.”
Photograph: The Lloyd’s of London building in the City of London. Photo credit: Hollie Adams/Bloomberg
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