The global maritime insurance industry is facing its most significant stress test in decades following the weekend’s dramatic military escalation in the Middle East. After joint U.S. and Israeli strikes on Iranian infrastructure on February 28-part of a campaign dubbed "Operation Epic Fury"-and subsequent Iranian retaliation across the Gulf, the cost of moving goods through the world’s most sensitive chokepoints is being rewritten in real-time.
By this morning, the fallout was clear: a cascade of "Notice of Cancellation" clauses, a de facto closure of the Strait of Hormuz for commercial fleets, and a market preparing for a Monday morning of unprecedented volatility.
Major marine war risk providers, including Oslo-based Skuld and NorthStandard P&I, have already begun issuing formal 72-hour cancellation notices for coverage in the Middle East Gulf and the Gulf of Oman. These notices, effective March 5, essentially reset the terms of engagement for any vessel entering the region.
"Against this backdrop, the Association has decided to issue the Assureds with a notice of cancellation," Skuld stated in a circular on March 1. The move follows reports of at least three tankers being damaged by strikes and the targeting of Oman's Duqm port.
For insurance professionals, the 72-hour window is a frantic period of negotiation. Underwriters are not necessarily withdrawing entirely but are shifting to a "held covered" basis, where each individual transit must be approved and priced based on the literal hour-by-hour threat level.
Before the strikes, war risk premiums for the Persian Gulf hovered around 0.25% of a vessel's hull value. Market analysts now expect those rates to jump by 50% or more as markets reopen. For a $100 million Very Large Crude Carrier (VLCC), a single voyage’s insurance cost could climb from $250,000 to nearly $400,000.
Dylan Mortimer, a marine hull specialist at insurance brokerage Marsh, told The Guardian that he foresaw significant rate hikes ahead. “We would estimate that near-term rate increases for marine hull insurance in the Gulf could range from 25% to 50%,” he noted as the scale of the conflict became clear.
While Iran has not formally declared the Strait of Hormuz closed, the maritime industry has effectively imposed its own blockade. Major container lines, including MSC, CMA CGM, and Hapag-Lloyd, have suspended all bookings for the Middle East or directed vessels to "safe shelter" areas.
According to Lloyd’s List and Kpler tracking data, dozens of container ships and LNG carriers have already reversed course or diverted away from the Strait. The result is a "de facto closure" that forces vessels onto the much longer route around the Cape of Good Hope, adding 15 to 20 days to transit times and triggering secondary claims for cargo delay and business interruption.
The escalation brings the concept of "Constructive Total Loss" (CTL) back to the forefront of legal discussions. If vessels are trapped behind a blockade for an extended period - typically six to 12 months under standard war risk policies - they can be declared a total loss. With Supreme Leader Ali Khamenei confirmed dead and the Iranian leadership in flux, insurers are weighing the risk of a long-term, fragmented conflict that could leave assets stranded indefinitely.
Furthermore, the "Dark Fleet" - vessels operating without AIS transponders to evade sanctions or detection - presents a nightmare for compliance and liability. As "neutral" ships begin broadcasting defensive messages like "ALL MUSLIMS ON BOARD" to avoid targeting, the line between commercial trade and geopolitical signaling has blurred entirely.
For global insurers, the immediate focus is on capacity. As reinsurers pull back from Middle Eastern exposure, the remaining primary insurers must decide how much risk they can carry on their own balance sheets.
The military decides where the ships can go, but the insurers decide where they will go. Right now, the price of 'going' is becoming too high for the global supply chain to ignore.
