Marine insurance increases costs - Premiums for ships from war risk coverage have increased by over 1000%
As the conflict in the Persian Gulf expands, marine insurance premiums for war coverage are rising — in some cases by more than 1,000% — dramatically increasing the cost of moving energy through a critical maritime corridor.
The conflict in the Middle East has paralyzed traffic through the Strait of Hormuz, a major shipping bottleneck. War risk insurance allows shipowners to seek compensation for any damage to their ship or cargo resulting from conflict or terrorism. Policies are usually annual, although some cover single voyages through dangerous waters, including war zones.
The rise in premiums underscores how the war is raising costs for shipowners, traders and energy companies moving goods through the Strait, adding to fears that the conflict - which shows no signs of easing - could fuel inflation if it continues, analysts said.
Cargo war risk premium rates are also rising, with quotes being revised on a voyage-by-voyage basis, particularly for energy and bulk commodities trading. Analysts estimated that industry losses from at least seven reported damaged ships could reach as much as $1.75 billion.
With most tankers worth between $200 and $300 million, the new 3% insurance rate would mean a risk premium for the ship of about $7.5 million, up from about $625,000 before the conflict began.
More than 20 million barrels of crude oil, condensates and fuels passed through the strait on average each day last year, data from analytics firm Vortexa showed. About a fifth of the world's total oil consumption passes through the strait.
At least 200 ships remain anchored in waters off the coast of major Gulf producers.
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