The Lloyd's Market Association (LMA) has conducted a survey of the main participants in the Lloyd's marine war market in the week after 28 February, when the US-Israel-Iran hostilities commenced. Of those that responded, 88% continue to have appetite to underwrite international (including US and UK) linked hull war risks, and over 90% continue to have appetite to underwrite international (including US and UK) linked cargo. Premium terms differ according to each syndicate's appetite.
LMA cited the survey findings in a statement in which it clarified that marine war insurance cover for vessels operating in the Strait of Hormuz continues to be available.
In the statement released last week, LMA said, “Three weeks since the start of the hostilities in the Middle East, we are still seeing reports that suggest insurance coverage is cancelled or unaffordable and that this is the reason that vessels are not transiting the Strait of Hormuz.
“This is not accurate.”
Safety concerns
The reason ships are not moving is not through a lack of insurance; it is a question of the risk to crew and vessel safety being assessed by the ship masters and owners as too high, the statement said.
In the marine war insurance market comprising hull, cargo and liability, notice of cancellation is built into shipowners’ contracts to allow renegotiation to take account of increased risk to vessels should they be trading in an area of heightened risk. The hull war risk market has a well-understood notification mechanism agreed between shipowners and insurers in their war contracts, which allows war premiums to remain very low in peacetime. In fact, such premiums are little more than notional: if applied, for instance, to an average family car, the cost would be under GBP1 ($1.33) for a year. This mechanism instead allows for premiums to be reassessed when risk increases. This happened most recently with the Ukraine war and in the Red Sea.
LMA said that war insurance is currently available to cover insureds from war perils and it remains available within the Lloyd’s and London company market for vessels wishing to transit the Strait of Hormuz. Liability coverage through the P&I Clubs is non-cancellable and remains reinsured in the London market. A small number of fixed premium P&I covers for charterers were cancelled and mostly repriced.