The escalating conflict between the United States and Iran has delivered a sharp blow to London’s centuries-old maritime insurance industry, as the prolonged closure of the Strait of Hormuz leaves hundreds of vessels stranded and insurers grappling with unprecedented levels of risk.
Pressure is building to find a way to safely reopen the narrow maritime channel, allowing an estimated 1,000 trapped vessels and their crews – mainly oil and gas tankers, but also container ships – to continue their journeys and restart the global flow of fuel, chemicals, and goods. A total of 23 vessels had been attacked between the start of the war and last Thursday, according to analysts from Lloyd’s List Intelligence, including near misses and those that sustained minor damage. Several crew members have been killed.
Ministers met on Friday to discuss the latest developments in the Middle East, including Iran’s targeting of unarmed commercial shipping and civilian infrastructure, such as oil and gas facilities, as well as its blocking of the Strait of Hormuz.
Ministers condemned Iran’s expansion of its targets to include international shipping, agreeing that Iran’s reckless strikes – including on Red Ensign vessels and those of close allies and Gulf partners – risk pushing the region further into crisis and worsening the economic impact felt in the UK and around the world.
Ministers confirmed that the agreement allowing the US to use UK bases in the collective self-defence of the region includes US defensive operations aimed at degrading the missile sites and capabilities used to attack ships in the Strait of Hormuz. The government underlined that the UK is working closely with international partners to develop a viable plan to safeguard international shipping in the strait.
War insurance premiums have soared since the outbreak of the conflict, rising to between 3.5% and 7.5% of a vessel’s value, according to David Smith, head of marine at broker McGill and Partners, which operates in the Lloyd’s of London market. This compares with 1% to 1.5% a week earlier, and 0.25% before the war. Lloyd’s of London insists coverage remains available, though brokers have conceded there has been little demand for transits through the strait in recent days.
Richard Meade, editor-in-chief of Lloyd’s List Intelligence, warned there is a “huge build-up of risk” in the area. “We are still not at the stage where ships are being profiled in these attacks, as far as we can tell. Some are falling into the category of collateral damage or hits intended to sustain the closure of the strait,” Meade told The Guardian.
Silke Lehmköster, fleet managing director at Hapag-Lloyd, described the conditions her company would require before directing crew to attempt a transit. “We would need an end of this escalation, so that there are no drones, no missiles, none whatsoever flying, and a clear message from everyone that they would stop,” she told CBS.
David Appleton, a senior leader at the trade union Nautilus International, told The Guardian that the threat differs significantly from dangers such as piracy, which crews could mitigate, as this is not possible in a conflict where drones and unmanned vehicles are used. “You would have armed guards on board in certain places, you would have operational procedures where you’d avoid certain areas or you would travel at certain speeds so you weren’t vulnerable to attacks. But none of this applies to the current situation,” Appleton said.
The UK government reaffirmed its commitment to defending its people, interests and allies, acting in accordance with international law while avoiding being drawn into the wider conflict, and underscored the need for urgent de-escalation and a swift resolution to the war.
