Renewed hostilities in the Strait of Hormuz on June 27 have undermined the fragile ceasefire signed earlier this month, ending any near-term prospect of a premium reversal in the Gulf war-risk market. Brokers and underwriters had already cautioned against any rapid easing of rates even before the latest escalation - according to the Khaleej Times, the scale of the premium spike over recent months makes a swift reversal structurally unlikely.
Before the conflict began on February 28, war-risk rates for vessels transiting the Strait of Hormuz stood at around 0.25% of hull value. Dylan Saunders-Mortimer, UK war leader at Marsh, said rates surged to as high as 10% of vessel value at their peak - an increase of close to 4,000%. Current industry estimates put the range at between 3% and 8% of vessel value, translating into insurance bills of US$3 million to US$8 million for a single large tanker transit. When risk has been repriced that sharply, it does not unwind quickly.
Rishi Thapar, head of war, terrorism and political violence at Lockton, said the market is stabilising but not resetting. "We're seeing some early signs of pricing improvement, but recent losses and ongoing uncertainty mean the market will adjust gradually rather than sharply," he said. Neeraj Gupta, CEO of Policybazaar UAE, said underwriters would require two to four weeks of confirmed de-escalation before lower geopolitical risks begin to feed through to pricing, with a full return to pre-conflict rates potentially taking several months - a timeline that has been pushed further out by the June 27 escalation.
The more immediate constraint on Gulf shipping is not insurance availability but crew safety. "The Strait of Hormuz is not seeing those transits because of insurance challenges. It's not seeing those transits because of the safety of the crew, safety of the cargo, and the vessel," said Rahul Kapoor, vice-president and global head of shipping at S&P Global Energy. That distinction matters for how the insurance market recovery should be read: even if war-risk premiums normalized tomorrow, shipping volumes would not immediately follow.
In the weeks prior to the conflict, an average of 178 ships transited the Strait of Hormuz each day. According to the Khaleej Times, traffic reportedly fell by around 95% after hostilities began. The Joint War Committee of the Lloyd's Market Association expanded its high-risk designation to cover the entire Persian Gulf as major maritime insurers suspended or sharply repriced war-risk coverage.
The withdrawal of private capacity prompted an unprecedented government intervention. The US International Development Finance Corporation launched a US$20 billion maritime reinsurance facility in early March, with Chubb appointed as lead underwriter. By April 3 the facility had expanded to US$40 billion, with Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr and CNA joining alongside Chubb. Half of the US$40 billion in reinsurance is assumed by the US government, with the remaining half backed by the seven participating insurers.
Insurers said a full resumption of normal cover will require sustained evidence that a single incident would not trigger renewed escalation - a threshold that appears further away after the events of June 27. Until that bar is met, the Strait of Hormuz is likely to remain navigable but not normal, keeping premiums elevated and global energy markets sensitive to even minor security developments in the Gulf.
