Marine insurers have reacted swiftly to the conflict in the Middle East and the threat that any vessel passing though one of the world’s most important waterways would be attacked.

As the conflict intensified a commander from the Iranian Revolutionary Guard told the media the  Strait of Hormuz was now  “closed” and that any vessel attempting to pass through would be set “ablaze”. Then strait is used for the movement of 20% of the world’s oil and huge amounts of other products such as LNG.

In London the insurance industry’s Joint War Committee was convened to deliver clarity for owners who have vessels in the area.

Neil Roberts, (above pic) head of marine and aviation at the Lloyd’s Market Association and Secretary of the Joint War Committee, has provided the following update:

“The London insurance market is reacting proportionately to developments; marine insurers are assessing their exposures and reacting according to the provisions of their contracts which might include giving notice of cancellation.  Hull war insurers had already designated the area as requiring prior notification and agreement of terms in order for insureds to be able to send their vessels through the area.”

He added: “The London market’s Joint War Committee (JWC) met yesterday to consider the Listed Areas. This is the list of geographical areas where JWC has assessed vessels to be at increased risk of war-related perils. The JWC agreed to revise the areas in light of recent events. The amended Listed Areas have now been published. The JWC continues to monitor developments closely and will keep the situation under review, noting that the marine hull war market remains open for business for shipowners requiring coverage.”

A spokesman for the International Union of Marine Insurance (IUMI) said the conflict will impact the ability to access cover for certain areas and risks.

“IUMI and the marine insurance community are closely monitoring the situation in the Middle East and, in particular, the safety and free passage of shipping in the Persian Gulf and Red Sea,” he explained. “As with all shipping interests, the safety of seafarers will be a priority for owners.

“The situation remains fluid and many operators will re-route their vessels to avoid the high-risk areas. Insurers will be mindful of the impact this might have on accumulations at nearby ports as well as on the vessels and crews as they navigate longer sea routes. We are likely to see disruptions to supply chains in the short-term, as a result.”

The spokesman continued: “The granting of war cover for the Persian Gulf and Red Sea is only likely to be available under specific agreement on a single voyage basis as long as navigation is authorised by governments and flag states.  In the current fast-paced situation, insurers will regularly re-examine their ability and willingness to that provide cover.”

Peter Hulyer, head of P&I, UK, Marsh added: “Given the escalating military operations in the Middle East over this weekend, a majority of the International Group clubs have given Notice of Cancellation for their non-poolable War covers. In most cases the clubs will be offering to reinstate War coverage at terms to be agreed. Mutual P&I cover offered by the clubs is unaffected by the above.”

Law firm Kennedys said the risk were significant and it was likely that insurers will react with a great dela of caution as the conflict continues to develop.

In a statement it said: “Much of the Red Sea, Gulf of Aden and Persian Gulf, and their adjacent states, are already excluded areas for the purposes of marine hull insurance, which often includes primary war P&I insurance. Calls there are subject to negotiated terms and conditions. Other states bordering the Persian Gulf, Red Sea and elsewhere may be added as excluded areas. The marine liability market (impacting principally fixed premium P&I and charterers liability covers) are giving notice of cancellation for Iran/Persian Gulf and again, cover can be reinstated by agreement.

“There are already reports of vessels being attacked in the Strait of Hormuz and off Oman – both shadow and non-shadow fleet – resulting in damage and sadly in loss of life. Attacks on laden tankers could result in very significant pollution. In addition to the risk of missile/drone strikes, vessels may well be at risk by closure of the Strait of Hormuz, announced by the IRGC, but it is unclear whether mines have been deployed.”

It continued: “The Houthis, after a period of relative inactivity, have indicated that they will resume military operations in the Bab Al-Mandab Strait/the Red Sea, impacting at least Israeli and US vessels. Whether or not there is regime change in Iran and even if the US/Israeli operation concludes in four weeks, the Persian Gulf, Red Sea and Gulf of Aden will likely remain highly volatile.

“This will obviously impact war premiums. If vessels remain stuck for a prolonged period in the Persian Gulf, as we saw in Ukraine, insurance may become uneconomical for some Owners. Disputes can be expected between owners and charterers whether owners are obliged to comply with orders into affected areas, whether vessels are placed off-hire and contract frustration.”