Continuing tensions in the Middle East are affecting global shipping and placing new claims pressure on the marine insurance market. The latest assessment from the International Union of Marine Insurance (IUMI) indicates that approximately 70 casualties linked to the Gulf conflict since late February could result in potential insurance claims of USD 1.5 billion to USD 2 billion. As claims exposure increases and war risk premiums fluctuate sharply, the impact is gradually spreading to shipowners, carriers, and freight forwarders worldwide.

Key Highlights

• Approximately 70 casualties: Potential insurance claims could reach USD 1.5 billion to USD 2 billion.

• Prolonged loss-of-use risk: Under some insurance policies, a vessel that remains out of operation for 12 consecutive months could give rise to a total loss claim.

• Three shipping regions under pressure: Risks in the Strait of Hormuz, the Red Sea, and the Black Sea are all drawing attention.

• War risk premiums rise sharply: Premiums for the Strait of Hormuz reached a peak of up to 10% of a vessel’s value.

• Costs pass through to the logistics sector: Higher marine insurance costs could further affect freight rates and freight forwarder quotations.

Around 70 Casualties Add to Claims Exposure

According to Xinhua News Agency, citing Lloyd’s List, IUMI estimates that approximately 70 casualties linked to the Middle East conflict could expose the marine insurance market to claims of USD 1.5 billion to USD 2 billion. IUMI Director General Lars Lange said the estimate includes hull damage, loss of hire, and other related economic losses. As the relevant claims have not yet been fully paid, the figure remains an estimate of potential losses and may change.

The insurance market is paying closer attention to the risks arising from vessels remaining out of operation for extended periods. Under some insurance policies, a vessel unable to operate for 12 consecutive months because of war risks may give rise to a total loss claim.

A similar situation arose following the outbreak of the Russia–Ukraine conflict in 2022, when many vessels became trapped in Ukrainian ports. The market initially estimated that related total loss claims could reach USD 800 million to USD 1 billion. As of March 2023, industry figures indicated that approximately 58 vessels were still involved in related claims, with a combined market value of around USD 440 million. Settlement negotiations subsequently began within the insurance market.

Risks Accumulate Across the Strait of Hormuz, Red Sea, and Black Sea

The war risks currently facing global shipping are not limited to the Middle East. The Strait of Hormuz crisis, attacks on vessels in the Red Sea, and Black Sea shipping risks arising from the Russia–Ukraine conflict are all adding uncertainty to international shipping. Insurers must reassess their underwriting terms for different high-risk areas, while shipowners and carriers may face greater operating risks and transportation costs.

Changes in insurance pricing for the Strait of Hormuz have been particularly significant. Public market data indicate that war risk premiums were approximately 0.25% of a vessel’s value before the conflict. At the height of market pressure, quoted rates rose to 7.5%–10% of a vessel’s value, with some reaching the upper end of that range. Although rates have since eased, they remain well above normal pre-conflict levels and continue to increase shipowners’ operating costs.

Higher Insurance Costs Feed Through to Freight Forwarders

Insurance remains available for high-risk routes, but pricing and underwriting terms have changed significantly. As war risk premiums rise, shipowners and carriers face higher operating costs, some of which may be reflected in freight quotations and additional surcharges. For freight forwarders, higher marine insurance costs may ultimately affect freight rates, surcharges, and transportation plans.

Freight forwarders handling shipments moving through or connected with the Middle East, Red Sea, and Black Sea should monitor not only sailing schedules and base freight rates but also war risk premiums, route risks, and changes to underwriting terms. If the conflicts continue, insurance costs for high-risk routes may remain elevated and continue to affect global supply chains.

Sources

Xinhua News Agency, Lloyd’s List, the International Union of Marine Insurance (IUMI), S&P Global, and other publicly available industry information

Disclaimer

This article has been compiled from publicly available information and is intended solely for industry reference. It does not constitute insurance, shipping, or commercial advice. The situation and market prices may continue to change. Please refer to the latest information issued by official sources and relevant institutions.