The war that broke out in the Gulf region, following US and Israeli strikes on Iran, has led insurers to cancel war risk covers and raise premiums for vessels sailing in the region and transiting the Strait of Hormuz.
On Saturday (28 February), war-risk underwriters issued formal cancellation notices for policies covering ships transiting the world’s most critical oil chokepoint. According to brokers speaking to the Financial Times, premium rates are expected to climb by as much as 50% in the coming days.
The article said that insurance costs for vessels in the Gulf, previously hovering around 0.25% of a ship’s replacement value, are set to rise to 0.375%. Dylan Mortimer, Marine Hull UK War Leader at broker Marsh, noted that these increases are sweeping; ships calling at Israeli ports, which typically see rates of 0.1%, are also facing 50% hikes.
Some major oil and trading companies have reportedly suspended shipments through the Strait of Hormuz, a vital artery for global oil shipments.
Conflict escalation threatens Gulf states
The regional security landscape shifted dramatically following the initial strikes on Iran by the US and Israel. A statement from Iran's Supreme National Security Council, read out by several state broadcast channels, confirmed Ayatollah Khamenei was killed in his office early on Saturday morning.
Tehran has retaliated with attacks on the five GCC members, Bahrain, Kuwait, Qatar, Saudi Arabia and the UAE. The scope of the Iranian attacks has also widened to include various commercial and civilian facilities across multiple locations in the region, including airports, ports and residential towers. US military bases in these countries were also attacked.
The Gulf countries have closed their airspace. Hundreds of Umrah pilgrims remain stranded at airports, with airlines working to re-accommodate passengers.
In the UAE, the strikes hit various interests in Abu Dhabi and Dubai. The Burj Khalifa was later evacuated following reports that its surrounding area had been targeted, which marks an unexpected turning point in the course of events.
Developed by Emaar Properties, the 828-meter Burj Khalifa in Dubai is the world's tallest building and free-standing structure. The All Risk and Property Insurance programme for Emaar Properties, including Burj Khalifa, is arranged by Sukoon Insurance with Munich Re as a leading reinsurer. Burj Khalifa is a $1.5bn property in the heart of the $20bn Emaar Properties district.
Oman, the sixth GCC member, has been spared from Iran’s attacks because of its neutral foreign policy in the conflict between Iran and Israel.