This story has been updated since initial publication to reflect the cancellation of war-risk cover effective March 5.
War-risk cover for vessels operating in Gulf waters will lapse from midnight on March 5 (GMT) after marine insurers issued cancellation notices amid escalating tensions around the Strait of Hormuz.
Oslo-based marine insurer Skuld has cancelled war risk cover for the Persian Gulf and Gulf of Oman altogether, London-based markets tracker Argus Media reports.
“It is already evident that reinsurers' appetite for war risk exposure is tightening, and in practical terms, it will result in reinsurers withdrawing capacity at short notice,” Skuld said. “Against this backdrop, the Association [Skuld] has therefore decided to issue the assureds with a notice of cancellation of the War Risk Cover.”
Argus writes that, according to Skuld, the notice of cancellation supersedes any other terms with respect to war risks that may be agreed.
“It applies to war risk cover only; all other terms of cover are unchanged. The notice does not alter the position of any other area currently restricted or excluded under respective policies. The notice does not affect mutual protection and indemnity (P&I) and freight, demurrage and defence (FD&D) cover, and the excess war risks cover afforded to assureds with mutual P&I cover, according to Skuld.”
Alongside the cancellations, operators are facing sharp premium increases on voyages through the region. Premium increases of up to 50% have been reported for some voyages, with predictions that insurance costs could spike by as much as 60% on certain key lanes.
American investment manager Franklin Templeton reported that “shipping costs are already moving” and that “insurers are the accelerant”.
Krugell, said the price of oil had immediately reacted following Saturday’s missile strikes launched by the US and Israel against Iran.
News that a tanker had caught fire off the tip of Hormuz, presumably after it was struck by ordnance while sailing close to the coast of Musqat in Oman on Sunday morning, has raised significant concern.
Krugell said the price of oil was expected to continue rising north of the $70 mark because of tension in the Gulf.
On Monday morning, Oilprice.com reported the price as $70.11 per barrel while Brent Crude was $76.51 per barrel.
