Hormuz insurance spikes

War-risk cover for ships using the Strait of Hormuz climbed to about 1% of a vessel’s insured value for seven days of transit after the latest Middle East fighting, a jump marine insurers said took days, not months. (spglobal.com) That surcharge is paid on top of a ship’s normal annual insurance and is typically quoted as a percentage of hull value for a short voyage through a listed danger zone. Before the recent escalation, sources told S&P Global that Persian Gulf premiums had sat around 0.05% to 0.07% for roughly 18 months. (spglobal.com) By late March, S&P Global said the Hormuz premium had eased back to about 1% from peaks near 2.5%, showing how quickly insurers repriced the route when ships, ports and crews were suddenly exposed to missile and drone risk. (spglobal.com) The Red Sea has moved more slowly. S&P Global reported that extra war-risk premiums there fell to about 0.7% only after the market had spent more than a year absorbing Houthi attacks, ceasefires, and partial reopenings. (spglobal.com) Shipowners have not rushed back even when attacks paused. Lloyd’s List reported this month that container lines restarting Red Sea services still face route uncertainty, and earlier Lloyd’s List data showed Suez Canal traffic remained about 60% below pre-attack norms well after the first wave of diversions. (lloydslist.com) (spglobal.com) That caution is feeding a second pricing problem: insurers are charging for the chance that a route stays risky even when no ship is hit that week. S&P Global said lead underwriters wanted “material changes” in security conditions before cutting Red Sea premiums much further. (spglobal.com) Lloyd’s List reported on April 23 that intelligence warnings pointed to Houthi discussions about formalizing control over Red Sea shipping, including possible tolls. The same report said those warnings were hitting a market already dealing with fresh military crises elsewhere in the region. (lloydslist.com) Route changes are also shifting pressure onto ports outside the main danger corridor. Lloyd’s List has tracked a broader reshuffling of cargo flows around Suez since the Houthi campaign began, with some hubs gaining traffic while others lose it as carriers choose longer voyages around the Cape of Good Hope. (lloydslist.com) For shipowners, the comparison is now stark: Hormuz repriced like a sudden battlefield, while the Red Sea is being priced like a chronic condition. In both cases, the insurance bill has become part of the route map. (spglobal.com 1) (spglobal.com 2)