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Recent instability in the Middle East has renewed attention on one of the most important but often overlooked drivers of global trade: the availability of marine insurance.
Keeping maritime trade moving often requires more than private insurance capacity alone. Governments may also provide security guarantees, including naval escorts, protected shipping corridors, or military deterrence designed to reduce the risk of attacks on commercial vessels. These measures can stabilize insurance markets allowing insurers to continue underwriting voyages that might otherwise become uninsurable.
Maritime shipping carries roughly 80% of global trade by volume.1 Yet the global marine insurance market that supports this activity remains relatively small, generating about $40 billion in annual premiums.² This imbalance reflects the way marine insurance is priced: insurers charge premiums based on the probability of loss rather than the total value of goods transported.
As a result, a relatively modest premium base supports a far larger volume of global seaborne commerce because losses are infrequent, exposures are diversified, and most voyages are completed without incident.
In periods of geopolitical stability, this system functions efficiently. During conflict, including the recent tensions affecting shipping routes in the Middle East, the availability and pricing of marine war-risk insurance can help determine whether ships continue sailing at all.
When war-risk coverage becomes unavailable or too expensive, a voyage may no longer be commercially viable.
Structure of the Marine Insurance Market
Marine insurance typically includes three core types of coverage
- Hull Insurance: Covers physical damage to vessels.
- Cargo Insurance: Protects goods transported by sea.
- Protection and Indemnity (P&I): Provides third-party liability coverage for shipowners.
Marine insurance exposures can also be very large. A large container vessel may carry cargo worth substantially more than the insured value of the vessel itself. Because marine risks are often shared across multiple insurers and reinsurers, a single vessel operating in the Persian Gulf may have:
- Hull coverage underwritten in London
- Cargo insurance placed through Asian insurers
- Liability coverage provided by a Scandinavian P&I club
- Reinsurance distributed globally
Although global shipping is inherently international, marine insurance underwriting capacity is geographically concentrated. A relatively small number of regional insurance markets account for the majority of marine insurance premiums worldwide.
Approximate Global Marine Insurance Premium by Major Underwriting Hub3
Within these regional totals, several major underwriting hubs play particularly important roles:
- London market (Lloyd’s + London companies) – roughly 9–12% of global marine premiums
- China – roughly 15–18% of global cargo premiums
- Nordic markets – roughly 12–14% of global hull insurance
- Japan – roughly 7–8% of marine premiums
Role of the London Market in Marine War-Risk Underwriting
The London market, including Lloyd’s and the company market, remains the leading center for marine war-risk underwriting. London hosts a concentrated ecosystem of marine insurers and syndicates, global insurance brokers, maritime law firms, and specialized underwriting expertise.
The Joint War Committee of the Lloyd’s Market Association maintains a list of high-risk maritime regions. When a region is placed on this list, insurers typically impose additional war-risk premiums and reassess voyage approvals.
Unlike most insurance policies, war-risk coverage is often priced per voyage rather than annually. Under normal market conditions, war-risk premiums typically range between 0.01% and 0.05% of vessel value per voyage according to marine insurance broker commentary and maritime industry reporting.4
During severe conflicts, however, war-risk premiums can rise dramatically and materially alter voyage economics, at times exceeding 1%. At these levels, insurance costs alone can determine whether a voyage remains economically viable.
Accumulation Risk in the Strait of Hormuz
The Strait of Hormuz presents a particularly significant accumulation risk for marine insurers. Large crude tankers transiting the region typically have insured values exceeding $100 million when vessel and cargo values are combined.
With dozens of vessels often operating in or near the Strait at any given time, total insured exposure can easily reach several billion dollars in a single geographic corridor. For marine insurers, this represents a classic accumulation risk scenario, where a single geopolitical event could affect multiple insured assets simultaneously.
Insurance markets can effectively close a shipping lane even when the waterway itself remains physically open. If war-risk premiums rise beyond the economic viability of a voyage—or insurers withdraw coverage entirely—shipowners and charterers may avoid the region.
Historical episodes show that war-risk premiums can rise sharply during major conflicts. During the late stages of the Iran-Iraq Tanker War, market reporting cited rates of around 2% of hull value for Gulf business, while other reports noted that Lloyd’s underwriters raised or doubled Gulf war-risk premiums as attacks on shipping intensified.5
Russia’s invasion of Ukraine in February 2022 triggered one of the most significant disruptions to marine war-risk insurance markets in decades. War-risk premiums for vessels entering Ukrainian ports initially spiked to approximately 2%–5% of vessel value, up from about 0.025% before the war. By November 2023, Reuters reported that premiums had risen to as much as 3% following an attack on a merchant vessel, while by August 2024 additional war-risk premiums for ships entering Ukrainian ports were quoted at up to 1.2%, with discounts in some cases bringing rates lower.6
Government Backstops and War-Risk Insurance Markets
Governments occasionally intervene in insurance markets when geopolitical events threaten the availability of coverage for critical economic activity. Marine insurance backstop programs generally operate through one of three mechanisms.
- First, governments may provide direct war-risk insurance to shipowners, a model widely used during World War II when private insurers could no longer underwrite wartime shipping risks.
- Second, governments may provide reinsurance guarantees, allowing private insurers to continue issuing policies while the state assumes catastrophic loss exposure above a defined threshold.
- Third, governments may support shipping through security guarantees, including naval escorts or protected shipping corridors that reduce the underlying risk to insurers and shipowners.
Government insurance backstops during crises have historical precedent. During World War II, the U.S and several allied governments provided direct war-risk insurance after private insurers withdrew from wartime shipping markets. More recently, the U.S. government established the Terrorism Risk Insurance Program (TRIP) following the September 11 attacks, providing a federal backstop for terrorism-related insurance losses while preserving private market participation. The proposed maritime facility reflects a similar approach—supporting insurance market stability while allowing private insurers to continue underwriting risk.
Strategic Importance of the Strait of Hormuz
The Strait of Hormuz remains the most important oil transit chokepoint in the world.
According to the U.S. Energy Information Administration:
- Approximately 20 million barrels of oil per day pass through the Strait, representing roughly 20% of global petroleum consumption and nearly one-third of global seaborne oil trade.7
- The corridor is also critical for global natural gas supply. Roughly 20% of global liquefied natural gas (LNG) exports transit the Strait, primarily from Qatar, one of the world’s largest LNG exporters.
- The corridor also matters for fertilizer trade, including exports of ammonia and urea from Gulf producers, with implications for agricultural markets and food security.8
- In addition, the Strait handles heavy and continuous vessel traffic, adding to the accumulation exposure faced by marine insurers.
Recent developments highlight the growing safety risks facing vessels transiting the Strait of Hormuz. Maritime authorities, including the United Kingdom Maritime Trade Operations (UKMTO), have reported multiple incidents in which commercial ships were struck by projectiles or damaged in attacks near the shipping corridor.
As a result, shipping activity through the Strait has declined sharply, with some industry estimates suggesting that transits fell by as much as 80% during the height of the crisis as shipowners delay voyages amid security threats and sharply rising war-risk premiums.9
At the same time, the United States has moved to stabilize marine insurance markets by establishing a $20 billion maritime reinsurance facility designed to backstop insurers covering vessels operating in the Gulf. The program is expected to rely on private market participation, with Chubb identified as a lead U.S. insurer supporting the facility.10
Conclusion
The events in the Strait of Hormuz show that marine insurance is more than a financial backstop. In periods of conflict, the availability and cost of cover can shape whether ships sail and whether trade continues. For that reason, marine war-risk insurance remains an essential part of global trade resilience.
Citations
- United Nations Conference on Trade and Development (UNCTAD). Review of Maritime Transport 2023. United Nations, 2023.
- International Union of Marine Insurance (IUMI). Global Marine Insurance Report 2024. IUMI, 2024.
- International Union of Marine Insurance. “Facts & Figures Press Release 2025.” IUMI, 2025.
- Roberts, Neil. “Proceeding with Caution.” IUMI Eye, Mar. 2024, International Union of Marine Insurance.
- “Lloyd’s Doubles War Risk Premiums for Gulf.” Australian Financial Review, 21 Apr. 1988.
- Insurance Costs of Shipping through Black Sea Soar. Reuters, 25 Feb. 2022; Ukraine War Risk Ship Premiums Rise After Attack, Sources Say. Reuters, 9 Nov. 2023; “Ukraine Boosts Grain Exports Despite Intensified Russian Attacks”. Reuters, 12 Aug. 2024.
- U.S. Energy Information Administration. “Amid Regional Conflict, the Strait of Hormuz Remains Critical to Global Energy Security.” Today in Energy, 16 June 2025.
- Food and Agriculture Organization of the United Nations. Food Outlook: Biannual Report on Global Food Markets.FAO, 2023.
- “Strait of Hormuz Transits Collapse as Shipping’s Risk Appetite Is Tested.” Lloyd’s List, 13 Mar. 2026.
- Reuters. “Chubb to Serve as Lead U.S. Insurer for Gulf Shipping Amid Iran War.” Reuters, 11 March 2026.
