US, UK and Israeli ships charged three times more than others for Middle East war cover

Meanwhile, some Lloyd’s sources are unhappy at what they see as misleading mainstream media coverage of marine insurance developments since the outbreak of hostilities.

Stories suggesting that some ships have had their hull war risk policies cancelled seem to rest on a confusion between primary hull war risk policies and charterers’ liability war risk extensions, they contend.

International Group P&I clubs have issued formal “notice of cancelation” for the latter class when vessels are in Iranian waters, arguing that their hands were forced after their reinsurers got the jitters.

But by the time the cover expires on Thursday, most clubs will ensure that it is effectively reinstated by way of a so-called buyback.

RUB exclusion parallel

This is largely a technical move, paralleling the “RUB exclusion” imposed on Russia, Ukraine and Belarus business in 2022 and a similar exclusion for the Red Sea in 2024.

The upshot is that charterers will end up paying for something they previously got as part of a package.

Given that the clients here include well-heeled oil majors and trading houses, the extra bills are not even going to touch the sides.

The fallout for shipowners will be limited to cases where they charter-in tonnage.

But there is resentment that the reports create the impression that some ships have had their insurance pulled mid-voyage, which is wide of the mark.

Hull war risk works on the basis that shipowners buy an annual baseline policy, usually attracting a premium of hundreds of thousands of dollars.

This protects them against such perils as war, revolutions, terrorism, strikes riots and the catch-all term “civil commotions”.

But underwriters retain the right — but not the obligation — to charge an additional premium or AP for each transit through an area designated as high risk. These can be as much as they see fit.

Joint War Committee

The list of high-risk areas is compiled by a body known as the Joint War Committee, which brings together underwriters from the Lloyd’s and London companies markets.

The JWC met this morning and is likely to have considered Iran’s tactics in the war, which have included missile attacks on nearby countries Tehran considers to be Washington-aligned.

As a result, Bahrain, Djibouti, Kuwait, Oman and Qatar have been added to the list.

Designated sea areas in the Persian/Arabian Gulf — to use the JWC’s terminology — as well as the Gulf of Oman, Indian Ocean, Gulf of Aden and southern Red Sea have also been extended.

This contrasts to the stance the JWC adopted when fighting between the US and Israel on the one hand and Iran on the other briefly flared up last year. At that time, the list remained unchanged.

Most underwriters are already charging APs for high-risk area transits, but do not broadcast their scale, regarding the information as commercial in confidence.

Every quote is bespoke and will factor in an owner’s claims record and the clout that comes from large fleets. In particular, owners that buy other marine classes from the same insurer can often cut a good deal on war risk.

But multiple underwriting sources said that in so far as it is possible to talk in terms of averages, rates last week had clustered in the 0.15% to 0.25% of hull value bracket.

Premiums even seem to have fallen of late, thanks to the competitive pressures generated by excess capacity in the hull market.

As of Monday, they shot up about 1%, as underwriters getting back to their desk took stock of the hostilities. Some underwriters said they were no longer conceding no-claims bonuses, which sometimes halved war risk bills in the past.

More specifically, vessels loading or discharging cargo in the Middle East Gulf but not planning any transit through the Strait of Hormuz might be able to achieve 0.5%-1.0% for a seven-day trip.

Those transiting the Strait of Hormuz to enter or exit the Middle East Gulf seem to be paying somewhere between 1.5% to 3%, with the higher end applicable to ships that the Iranians might consider to be associated with US, UK or Israeli interests.

South of the strait, for calls to ports such as Fujairah, prevailing rates remains at a relatively 0.3%-0.5%.

Even so, 3% looks high by historical standards. The most obvious relatively recent comparator is the Iran-Iraq War in the 1980s, in which hundreds of tankers were hit and rates went to 5% for an extended period.

There were unconfirmed claims that rates for Black Sea call surged as high as 10% in the immediate aftermath of the Russian invasion of Ukraine in February 2022, attracting accusations of price gouging from some shipowners. But pricing subsided soon afterwards.

Marine war risk is traditionally seen as a profitable class and even to some extent as the cream on top for hull underwriters, with the proceeds use to subsidise the hull & machinery in its periodic bouts of cut-throat market conditions.

But underwriters took a beating from a string of total losses inflicted on merchant shipping by the insurgent Houthi faction in the Red Sea in 2025.

While there are no aggregate figures, some underwriters believe that in the round, the class lost money last year.