2nd Quarter 2026
Despite the ceasefire and signing of a deal on June 18 between US President Donald Trump and Iran’s President Masoud Pezeshkian to end the Iran war, commercial insurance for Strait of Hormuz transits remains elevated. Iran’s announcement on June 20 that it would close the straight, citing Israel’s continued attacks on Lebanon, which it sees as a breach of the ceasefire, shows that security remains precarious in the region.
When the conflict started on Feb. 28, war risk premiums jumped on the risk of military or asymmetric attacks and danger from sea mines, and they will continue to remain at high levels until it is clear the peace settlement is holding and the waterway is safe to transit.
Commercial war risk premiums for crossings are effectively ‘spot prices’ set in a competitive market so they vary daily, which insurance companies note is a system that is working as it should in the market.
Quotes appear to vary but rates are currently around 1-5% of a ship’s value after spiking in April to 15% and then moving to around 5-10% at the beginning of May. When hostilities broke out at the end of February, they climbed to about 1.25% of a vessel’s value from the usual 0.1-0.25%. In March, premiums were around 5-7%.
However, insurers are offering no-claims bonuses of around 50% of the premium if ships make it through the Strait of Hormuz without incident. Rates continue to fluctuate, with underwriters revalidating pricing every day. They offer a risk premium window, which is valid for 24 hours or even as little as 12 hours and then the ship typically has 48 hours to make the transit.
Taking the capital valuation of an LNG vessel as $208 million before depreciation, as was indicated by Qatari shipowner Nakilat, insurance premiums at 5% would put the cost of transit at just over $10 million, with a $5 million rebate if the passage is successful.
As of mid-June, at least 13 LNG cargoes are understood to have been shipped out through the Strait of Hormuz since the war started, although most of those made their transits in May and June.
Vessels stuck in the Arabian Gulf to the west of the Strait of Hormuz are also facing elevated insurance costs; they are paying premiums that are set on a seven-day arrangement. These are currently around 0.25-0.5% of the ship’s value, which would work out at $520,000 to just over $1 million for a $208 million LNG carrier.
For war risk insurance, normally ships pay low commitment fees, but when certain maritime areas are subject to conflict, the insurance cover is removed then immediately reinstated at a higher level in what is effectively a reset.
On top of the war risk insurance, most of which is arranged through the Lloyd’s of London marketplace, shipping companies would need to obtain third party liability insurance from protection and indemnity (P&I) clubs including the London-based International Group of P&I Clubs, which provides cover for about 90% of the world’s ocean-going tonnage.
Insurance companies say that there is capacity available for maritime war risk insurance in the Strait (at the correct price) and that the handful of claims made so far have not tested limits. However, during the conflict the concern was that capacity could be tested if ships decided to transit in convoys with the possibility of losing two or three high value vessels in the same attack. This would force insurance companies to unlock second and third tier capacity which would further push up prices.
Most of the losses so far in the region have been for onshore property for which owners take out political violence (PV) insurance. The estimate for insured loss so far during this conflict was around $2 billion covering attacks on terminals, refineries, LNG facilities, and other infrastructure. PV insurance tends to be a first loss policy where only the initial $25 million of an entire asset’s value is covered, with yearly rates now at around 5-15%.
Lloyd’s, Chubb launch Hormuz insurance; DFC plan not yet activated
Lloyds of London and US insurer Chubb launched marine war risk insurance on June 19 which will offer up to $200 million of capacity for hull and P&I and another $200 million for Cargo.
The product is expected exist alongside President Trump’s offer of insurance through the US International Development Finance Corp. (DFC). The DFC proposal was made by Trump at the start of the war but has not yet been activated.
Under the plan, the DFC would cover losses of $20 billion with its commercial partners adding another $20 billion to bring the total maritime reinsurance facility to $40 billion.
Chubb was to be leading underwriter managing the US program and would have been joined by other US providers comprising Travelers, Liberty Mutual Insurance, Berkshire Hathaway, AIG, Starr and CNA.
The facility would provide war marine risk insurance for hull and liability, as well as cargo. Coverage would be offered for war hull risk insurance, war protection and indemnity insurance and war cargo insurance. To access insurance the key information required would include origin, flag, major beneficial and registered owners, owners of the cargo and information on lenders financing the vessel.
Some insurers have questioned the need for this facility given that the Lloyd’s of London market was operating as intended for war risk coverage (see LNG Finance, 1Q ’26).
This excerpt is taken from Poten’s LNG Finance in World Markets. Complete the form below to learn more or request a trial.