The Strait of Hormuz has been closed, mined, contested and partially reopened since February. War risk premiums surged from 0.125% of hull value to as high as 10% for the most exposed vessels - an 80-fold increase that generated headlines about a London marine war market finally getting what it deserved after years of soft conditions. The reality, four months on, is more complicated. The market has absorbed losses, written less business than the rate headlines imply, navigated a government intervention that solved the wrong problem, and is now pricing for a recovery that may or may not hold through a 60-day ceasefire window that expires in mid-August. Whether any of this adds up to profit depends on which part of the market you are in, and whether the next six weeks produce incidents or incidents produce further mines.
War risk insurance is a volume business in quiet times and a selection business in troubled ones. Before the conflict began on February 28, an average of 178 ships transited the Strait each day. Traffic collapsed by more than 80% in the weeks that followed. The Lloyd's Market Association confirmed in a March 23 market statement that insurance availability was not the reason ships stopped moving - crew safety was. That distinction matters for the profit and loss account in a way the rate headlines do not capture.
Elevated premiums on a fraction of normal volume don’t compensate for the premium pool that has ceased to exist. Even at the current post-ceasefire recovery, 172 ships transited in the week after the June 17 memorandum of understanding, according to tracking firm Kpler - against a pre-war daily baseline that exceeded 100 transits. The market is charging a hard price for the exceptions while the bulk of the business it would normally write simply does not exist.
Shipowners who did transit have experienced this directly. S&P Global reported in late March that a crude-laden Suezmax tanker's war risk premium reached $7.5 million for a single voyage - exceeding the $6.5 million freight earned on delivery. At those rates, the rational commercial decision is to anchor and wait - which is what several hundred vessels did. Insurers who priced correctly captured strong individual margins. Insurers who priced for volume were disappointed.
The freight market is now providing real-time confirmation of that dynamic. On June 25, Lloyd's List reported that the Baltic Exchange's TD3C Middle East Gulf-China VLCC index - the benchmark rate for moving crude from the Gulf to China on a very large crude carrier - fell 39% in two days, dropping to $313,140 per day, its lowest reading since the Hormuz crisis began. The drop was described by one broker as "brutal" and by an analyst as a "violently lower" repricing. It reflects the unwinding of the war risk premium that had been embedded in every fixture since February. A concrete illustration of how far rates had overshot: a VLCC fixture that had been provisionally agreed at Worldscale 410 failed because W410 was reportedly "unworkable" for the trader - the freight cost at that level made the cargo economics unprofitable. The market reset to W310 to attract commercial interest. The freight market and the insurance market are moving in the same direction, but freight is repricing faster. The insurance premium pool will only fully recover when voyage economics are viable enough that normal volumes return. W310 getting done is a step in that direction. W410 failing is a reminder of how far the market still is from normal.
The loss side of the ledger is equally sobering. Between nine and fifteen tankers sustained damage since hostilities began, including the Honduran-flagged Nova, struck by two drones and left burning in the Strait; the US-flagged Stena Imperative, with aerial impacts and one crew member killed; and the Marshall Islands-flagged MKD VYOM, whose crew member also died. Four seafarers were killed in a separate attack on a tug near the Strait, and at least one ship was hit yesterday.
Howden Re estimated that with at least seven tankers hit at an average replacement value of $250 million each, implied industry losses reached up to $1.75 billion before cargo claims. That figure alone would have represented a loss year for a mid-sized specialist marine war underwriter. It does not include the broader accumulation that makes this crisis structurally unlike the Red Sea episode of 2023-25. Concurrent losses have run across marine hull, marine cargo, energy infrastructure, political violence, aviation and trade credit - hitting the same reinsurance towers from different directions simultaneously. Saudi Arabia's Ras Tanura refinery, Bahrain's only refinery and Kharg Island all sustained strikes. Offshore platforms became effectively uninsurable at standard terms. The energy infrastructure claims will run for years.
The aggregation problem is the one that should worry the reinsurance market most. As Howden Re noted in its March analysis, Hormuz 2026 is a "rare multi-line insurance event testing the global reinsurance market simultaneously" - a scenario previously categorised as extreme. It is no longer theoretical. The question for renewal season is how much of it ends up in which reinsurance layer, and whether those layers were priced for a world where Hormuz could actually close.
When private capacity repriced sharply in the first week of the conflict, the Trump administration moved with unusual speed to backstop the market. The US International Development Finance Corporation announced a maritime reinsurance facility on March 6, initially at $20 billion and expanded to $40 billion two weeks later, with Chubb as lead underwriter alongside Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr and CNA as partners.
The intervention attracted attention. It also attracted no business. As Insurance Business reported in May, the $40 billion facility has written zero policies. The reason is instructive: Washington concluded the problem was insurance availability. The LMA said publicly, and the market said privately, that insurance was available throughout - at a price. Steve Ogullukian, deputy global underwriting director and reinsurance director at the American P&I Club, was direct. "The main takeaway here is that the reduced traffic going through the Strait has nothing to do with what insurance is available or not available," he said. "It's purely just a captain or a shipowner not wanting to put their crew at risk." The problem was not that underwriters had walked away from the Strait. The problem was a war, and the DFC cannot reinsure a war into safety.
For market participants, the facility raises a harder question than its zero take-up. If a future escalation triggers a claim under the DFC backstop, the political, legal and commercial implications of a US government agency paying hull and cargo war claims for tankers that sailed with military encouragement into a mined strait are genuinely uncharted. The facility caps private sector downside, but it also complicates the risk selection discipline that makes war risk underwriting profitable over a cycle. Underwriters who can rely on a government backstop for the extreme scenarios have subtly different incentives than underwriters who cannot.
The specialist London market did not retreat. It expanded, carefully. Beazley launched a $1 billion marine war consortium at Lloyd's in April - $500 million for hull war and $500 million for cargo war - backed by Lloyd's syndicates and London company market insurers, with scalable third-party capital behind it. "This consortium demonstrates the agility of the market to respond to the needs of global supply chains," said Adrian Cox, chief executive of Beazley. "We have been able to swiftly coalesce our market's combined expertise to deliver a highly specialist solution that will assist in keeping global trade moving." Patrick Tiernan, chief executive of Lloyd's, framed it as "the Lloyd's model at its best: capital and expertise aligning, not only to address immediate pressures, but to anticipate future requirements."
Lloyd's and Chubb then launched a further consortium this week offering $200 million in primary capacity for hull and P&I risks and a further $200 million for cargo, available from June 19 subject to underwriting criteria and sanctions screening. Evan Greenberg, chief executive of Chubb, said the consortium would give brokers and clients a straightforward solution while demonstrating the industry's role in supporting global commerce.
The appetite is genuine. So is the selectivity. Calvin Gray, global head of marine at Intact Insurance, told Insurance Business the market "will be deployed selectively, based on real-time assessments of risk rather than political announcements." That selectivity is the point. The underwriters who emerged from the Red Sea crisis in reasonable shape were those who priced for what the risk actually was, declined voyages they could not model, and did not chase volume because rates looked attractive in absolute terms.
The Hormuz crisis has not, so far, been a profitable episode for the war risk market in aggregate. It has been a period of large losses, sharply reduced volume, government intervention with uncertain long-term consequences, and an Iran-imposed insurance jurisdiction claim that nobody in the London market has any intention of accepting.
The more interesting question is what comes next. Hull war premiums have halved since the June 17 ceasefire, dropping from roughly 5% of vessel value to around 2% after discounts. Marcus Baker, global head of marine, cargo and logistics at Marsh, described the current picture carefully: conditions had improved since the ceasefire was extended, he told the Associated Press, but "there is a degree of nervousness around the situation." On cover availability he was more positive. "As far as the insurance position is concerned, there's a good deal of support for ship owners that are trying to move out," he said. His caveat was pointed: "We'll see what the next six weeks brings us."
James Reason, a broker at WTW, said the rate trajectory was positive but conditional. "The longer this continues without incident, rates will continue to improve," he told Insurance Business. "Everyone remains cautious, however, and there are still reports of mines in parts of the Strait of Hormuz transit corridors."
Raj Abrol, chief executive of Galytix, was blunter about the lag between market sentiment and underwriting reality. "Insurance premiums that spiked won't come down until underwriters believe the risk has genuinely changed," he said. "The word 'fragile' matters here."
It does. The demining commitment in the memorandum covers only the first month of the 60-day window. The main central transit route remains mined. Ships are being routed through narrower northern and southern corridors. The ceasefire has already moved between open and restricted multiple times. Iran's attempt to impose its own insurance regime through the Persian Gulf Shipping Authority - which the London market has no intention of recognising - adds a jurisdictional and sanctions dimension that the ceasefire has not resolved and the 60-day window will not settle. The PGSA itself is an OFAC-designated entity. Any shipowner paying fees to it after day 60 of the toll-free window would be transacting with a sanctioned organisation. That problem does not expire with the ceasefire.
The rates-at-2%-on-recovering-volumes scenario - if it holds - is where the profit opportunity actually sits. Not during the crisis itself, but in the extended repricing period that the market earns after demonstrating it can price, write and pay claims through an active war scenario at the world's most critical maritime chokepoint.
Howden Re's assessment - that the Red Sea 2023-25 and Hormuz 2026 together represent a permanent structural repricing of the marine war risk baseline - is the key long-term claim. If that baseline holds, the market that maintained discipline during the crisis, preserved its pricing integrity, and expanded capacity selectively will find itself writing structurally better business at structurally better rates for years. The JWC listed-area designation will not be formally removed until there is sustained incident-free passage, a settled geopolitical picture and formal evidence that demining is complete.
And every actuary modelling maritime chokepoint risk now knows, with a specificity that no model previously required, that the Strait of Hormuz can be closed. That knowledge is priced into every future renewal, every reinsurance tower, every aggregate limit that covers Gulf exposure. It does not go away when the mines are cleared.
Whether this year's accounts show a profit depends on where in the market structure you sit, which voyages you wrote, and whether the next six weeks are quiet. On June 25 - the same day the TD3C dropped 39% - a vessel identified as Ever Lovely was attacked in the region. The war risk premium that the ceasefire had begun to deflate may take days to price in; a single incident can raise it again in hours. The next six weeks started yesterday.
