As the efforts to reopen the Strait of Hormuz to all marine traffic continues (re)insurers have been told the longer the conflict goes on the bigger the risks to their balance sheets.

US president Donald Trump has called on NATO allies to send naval support to the Strait to ensure that 20% of the world’s oil and LNG supplies can transit safely through amid Iranian threats that US and other allied merchant vessels will be attacked.

To support the efforts to get merchant travel moving the US government has joined with a consortium of US insurers led by Chubb. To offer marine cover for vessels who are willing to move through the strait.

Chris Jones, chief executive of the International Underwriting Association, said the London market was keen to support marine clients but there needed to be careful planning with little opportunity for a swift resolution.

“Whilst we support any initiatives designed to improve security in the region, the timeline, scope and exact nature of any naval escorts in the Straits of Hormuz remains unclear at present,” he explained. “Such escorts have had some success in other conflict zones, but the current circumstances are uniquely challenging, and it is difficult to estimate the resources required to make any operation effective.

“The principal obstacle to a resumption of trade in the area remains one of safety, rather than any lack of insurance coverage. The master of individual vessels and shipping companies themselves are making operational decisions and must be satisfied that seafarers will not be placed in unnecessary danger before progressing.”

Ratings Agency Fitch said if the conflict is prolonged  then (re)insurers are likely to feel the impacts.

It said rating implications from the Iran conflict will be limited for the global insurance sector if the conflict remains short and major damage to oil production and shipment facilities is avoided.

“We believe the earnings impact for insurers will be manageable at current rating levels, as war risk is generally excluded, apart from for some very specialised markets, unless the duration and scope of the conflict widen,” it added. “A more prolonged period of economic and financial market volatility could indirectly affect insurers through loss cost inflation, falling asset values and rising defaults.

“Fitch considers London market and global specialty insurers to be most directly exposed to the conflict, through marine or aviation war, political violence, trade credit and energy lines. We do not expect significant claims from property damage, business interruption or cyber insurance policies because they typically exclude acts of war.”

Its briefing on the risks insurers face added: “Recent developments have tightened capacity, driven by a sharp repricing, and have created a correlated loss risk across war-risk insurance markets. Initial claims booked in 1Q26 will give an idea of the earnings impact, but we expect this to be limited for most insurers, as in 2022 with the escalation of the Russia–Ukraine war.

“We believe the conflict’s indirect, second-order losses are more likely to affect ratings than direct (re)insurance losses, which will likely be considerably lower. Rating effects could also stem from potential changes to sovereign or bank ratings that influence insurers’ ratings. Such effects are more likely if the conflict is more protracted or damaging than assumed under Fitch’s base case.”

On the issues in the Strait of Hormuz Fitch explained war risk coverage is compulsory at Lloyd’s when travelling through an area on the Joint War Committee list, such as the Strait of Hormuz. War-risk marine and aviation covers across the sector have been cancelled at short notice or rewritten at much higher rates.

“Premiums for maritime war covers for vessels transiting Hormuz are volatile but have increased by as much as twenty times the norms of 0.25% of vessels’ insured value. Aviation war clauses cover fleet damage and confiscation but exclude business interruption,” it continued.

Fitch concluded: “Approximately 1,000 vessels, with aggregate hull values exceeding $25 billion, are currently in the Gulf region and surrounding waters. The total insured loss from the destruction of a vessel can reach several hundred million US dollars, depending on its type and cargo. Marine war protection and indemnity insurance would also cover pollution risk if a major oil spill were to occur. Typically, this exposure is capped at $500 million per event. Aggregation risk is high owing to the presence of multiple vessels around Hormuz.”

“Whilst we support any initiatives designed to improve security in the region, the timeline, scope and exact nature of any naval escorts in the Straits of Hormuz remains unclear at present,”

Chris Jones, IUA