The peace deal between Iran and the US is described as "genuinely significant" by EDME Insurance Brokers' Managing Director - Reinsurance & Global Head of Natural Resources, Mr Kunal Khann.
However, he cautions that the insurance industry has what he calls “a long memory” and that “a peace deal is not the same as a stable risk environment”.
Mr Khanna said the crisis demonstrated that insurance can close a strait before a single mine is laid.
This is because on 1-2 March, P&I clubs issued 72-hour notices of cancellation for their war risk extensions in the Persian Gulf and Gulf of Oman.
Mr Khanna added, “Private war risk cover evaporated within days, and over 150 tankers sat idle waiting for coverage that no longer existed. That structural vulnerability in global trade does not disappear with a signed agreement.”
He also sees normalisation in the war risk market as gradual and conditional. “Government-backed reinsurance facilities must be wound down in an orderly way as private capacity returns, and it will return, but with discipline and with memory of what just happened. Some of the private players have sought interest from traditional insurance markets for war coverage, but as mentioned, we have asked them to hold until the market stabilises in a few months.”
The marine war insurance pool also remains essential during this transition period, as it exists precisely for moments when conflict is easing but private market capacity has not yet fully returned, said Mr Khanna. For shipowners, cargo interests and energy traders, this is not a time to step back from specialist brokers but to work closely with them, he added, noting that the coverage landscape is shifting quickly and the gap between conflict and normalisation is when exposure risk is most easily overlooked.
He concluded by saying that the peace deal is just the beginning, adding that the rebuilding of confidence in one of the world’s most critical maritime corridors is only just starting.
Seeking practical details
Mr Marcus Baker, Global Head of Marine, Cargo & Logistics, Marsh, said, “For the marine community, crucially absent from the agreement (as disclosed to date), are the practical details surrounding the Strait of Hormuz reopening, particularly Iran’s guarantee to respect freedom of movement within the Strait and the region as a whole.
“While some marine insurers recognise that conditions in the Persian/Arabian Gulf region have improved over the weekend, the overall market response in the short term will largely depend on further de-escalation of hostilities or perceived breaches of the agreement.
“In the longer term, following a final agreement, there will need to be a sustained period of no further attempted or successful attacks on commercial shipping before there is an adequate environment to implement a market-wide, significant and meaningful concession in insurance costs."
- by Jake Dellosa and Anoop Khanna, Middle East Insurance Review