Insurance war committee meets as Gulf tensions rise
The assassination of an Iranian general has prompted the reassessment of security risks
The JWC is understood to be assessing the increased security threat to shipping in the region, amid the growing fears that Iran will target tankers as it seeks revenge for the killing.
The Lloyd’s Market Association’s (LMA) Neil Roberts, a member of the JWC, told TradeWinds the committee is monitoring the situation closely.
Following the meeting he said: “Based on current information, JWC considers that there is no dramatic change to the strategic maritime picture.
“There are clearly increased tensions in the Gulf region, with American assets now referenced, but the underlying maritime threat remains heightened with an ongoing possibility of escalation.
“The London insurance market has been operating with these strategic factors in mind since last May and underwriters will continue to ask appropriate questions of assureds in order to ascertain the risk dynamics of individual sailings seeking war-risk cover.”
The JWC has already designated the Middle East Gulf region around the Strait of Hormuz an additional premium (AP) war-risk area, following series of attacks on tankers in the early summer last year.
Owners pay significantly more for war-risk cover in the designated AP high-risk danger areas.
The JWC does not discuss war-risk rates, which are left to individual underwriters to determine.
Extra insurance costs
Underwriters report there has been little change in war risk-rates since the dramatic US drone attack last Friday, as current rates already reflect the market expectation that there will be further attacks on shipping.
War-risk rates soared following a the attacks on tankers last year and the capture of the 50,000-dwt tanker Stena Impero (built 2018) by Iran’s Revolutionary Guard.
Underwriters are now assessing the risk situation to see if it warrants further increases in war-risk premiums.
One underwriter said more attacks on shipping would certainly prompt further increases.
“If the scale of subsequent attacks are more serious than previously thought, or more frequent attacks take place, or there is more profound damage or loss to the ships involved, then the rates may well increase,” he said.
At the height of the crisis last summer, a modern VLCC could pay as much as $280,000 in war-risk premium for a seven day voyage in the AP area.
Underwriters are also watching out to see if other Gulf States such as Oman, Kuwait or Bahrain become dragged in the political conflict which could require an expansion of the existing AP areas in the region.