The Strait of Hormuz crisis is putting renewed pressure on specialty insurers, as falling oil flows, higher war-risk premiums and mounting political violence losses test marine, energy and reinsurance markets.
In its report “Strait of Hormuz: Market implications of an evolving risk landscape,” Howden Re said global oil trade flows have fallen 62% since the conflict escalated. Brent crude prices have also moved above $100 per barrel, while vessel traffic through the Strait has dropped sharply as insurers expand high-risk zones and raise war-risk premiums.
The Strait of Hormuz is one of the world’s most important energy routes, handling about 20% of global seaborne oil trade. Howden Re said a major disruption or closure would force vessels to take longer routes, adding an estimated 22 to 30 days on average and about $650,000 in additional cost per voyage.
“The Strait of Hormuz remains one of the most strategically significant maritime chokepoints in the world. Its positioning means disruption can quickly create rerouting pressures, timing lags and compressed supply-chain resilience. The market reaction reflects a reassessment of geopolitical accumulation risk across marine, energy and political violence portfolios,” said Richard Miller, managing director, marine, energy and political violence at Howden Re.
The pressure is most visible in marine hull war, marine cargo war and war, terror and political violence (WTPV) insurance. Howden Re said these lines are now under “extreme” stress due to vessel attacks, damage to energy facilities, rising premiums and uncertainty over how claims will develop.
Marine hull war and marine cargo war markets have seen mass cancellations and premium increases of more than 1,000% in some cases. Additional premiums have also risen by 25% to 50%, according to the report.
WTPV is also under strain. Howden Re said the Middle East conflict could become the costliest loss event ever for the WTPV market, with estimated market-wide claims of about $2 billion to $3 billion. That would exceed the segment’s estimated annual global premium volume of $1.5 billion to $2 billion.
“War-risk pricing has reacted sharply, but the more important story is around sustained volatility, uncertainty of claims development and the pressure this places on specialty insurers already managing large recent losses which includes the Baltimore Bridge loss,” Miller said.
The report said recent major losses, including the Baltimore Bridge collapse, have added to concerns about aggregation exposure, multi-party liability and long claims development timelines. These issues are especially relevant for marine and infrastructure-related risks, where losses can involve several insurers, reinsurers and affected parties.
The impact is not limited to specialty insurance. Howden Re said the disruption is feeding into wider economic pressure through higher energy prices, supply-chain delays and rising costs for major commodities. The report cited an OECD downgrade of global growth to 2.9% from 3.3%, with global inflation nearing 4.5% due to market disruptions.
Construction costs could also rise later. Howden Re said supply-chain shocks often take time to appear in construction pricing because contractors and suppliers initially rely on existing stock. Once those buffers run down, higher material and transport costs can become more visible.
“The Strait of Hormuz crisis demonstrates how geopolitical conflict can rapidly evolve into a multi-line, macroeconomic insurance event. The impact is not isolated only to specialty classes and the surrounding Middle East markets - there are much wider implications still yet to develop across global supply chains that will affect other lines of business,” said Michelle To, managing director, business intelligence at Howden Re.
“Importantly, this event is also testing how the industry models interconnected geopolitical and economic risk. Clients are increasingly focused on resilience, scenario planning and understanding where concentrations exist across their global operations.”
Despite the pressure on marine, energy and WTPV lines, Howden Re said the wider reinsurance market remains able to absorb the shock. Global treaty capacity is still available, with April 1 renewals broadly in line with January 1 outcomes. For now, coverage has largely remained available.
