Kathmandu. London’s Lloyds of London, a traditional insurance marketplace based in London, has announced that it will continue to provide insurance coverage for ships crossing the Strait of Hormuz despite the ongoing conflict in the Middle East.
Lloyds CEO Patrick Tiernan told Bloomberg Television in an interview that fewer shipping companies are currently using the system due to the growing security risk. As a result, the demand for new insurance has decreased.
About 20 percent of the world’s oil, gas and other essential goods like fertilizers go through Strait. However, since the start of the conflict between Iran and the US÷Israel, this important route has almost come to a standstill.
The Lloyds Market Association (LMA) says insurance coverage remains intact, but premiums have risen significantly as risks rise. According to relevant sources, the war risk insurance premium currently reaches about 5 percent of the total value of the ship. That’s almost five times more than when the conflict began. CEO Patrick Tiernan said: “The cost of marine warfare risk insurance is highly variable. Premiums may rise or decrease abruptly, depending on the circumstances. ’
According to Patrick, premiums for this type of insurance are very low in times of peace but increase sharply in times of crisis. However, the sector’s share in the overall insurance industry remains limited.
The LMA’s Joint War Committee said that while insurance coverage exists, decisions are made on a case-by-case basis, assessing the risks in each case. According to the committee, more than 25 commercial aircraft have already been attacked.
Meanwhile, the U.S. International Development Finance Corporation (DFC) says it is creating a $20 billion reinsurance backstop with Chubb Ltd. to resume shipments on the route. However, Moody’s Ratings has made it clear that this initiative will not completely solve the crisis. “This is because it does not include liability cover,” Moody’s said.
Meanwhile, UK Treasury Secretary Rachel Reeves recently met Lloyd’s chairman Charles Roxburgh to discuss insurance support to keep supplies flowing through Hormuz and, if necessary, use the UK’s oil reserves if necessary.
According to CEO Patrick, collaborative efforts between the public and private sectors are critical in this situation. “We are in regular dialogue on this issue,” he said.
Although transportation to Hormuz has been halted due to increased security risks, the insurance cover remains in place. However, high premiums and safety concerns remain about whether this essential route will soon be able to return to normal. This situation could have long-term implications for the global energy market and the marine insurance sector. –Agency
