Lloyd’s market says insurance not behind Strait of Hormuz shipping slowdown

The Lloyd’s Market Association (LMA) has said marine war risk insurance remains available for vessels transiting the Strait of Hormuz, pushing back against suggestions that insurance constraints are responsible for the recent drop in shipping activity and stating that safety risks are the primary factor.

In a market statement published on 23 March, the LMA said reports that cover has been withdrawn or become unaffordable are inaccurate, noting that underwriting appetite remains across hull, cargo and liability war risks in the Lloyd’s and London company markets.

The clarification comes three weeks after the start of the conflict in the Middle East, which have increased security risks across one of the world’s most strategically important maritime chokepoints.

According to the LMA, the marine war insurance market is structured to allow premiums to adjust in response to heightened geopolitical risk through contractual notice mechanisms, rather than through the withdrawal of cover. Similar repricing measures were seen following Russia’s invasion of Ukraine and during recent Red Sea shipping disruptions.

A survey conducted by the association among Lloyd’s marine war insurers found that 88% continue to have appetite to underwrite internationally linked hull war risks, while more than 90% said they remain willing to cover cargo exposures linked to international trade, including US and UK interests.

Liability insurance provided through protection and indemnity (P&I) clubs remains non-cancellable and continues to benefit from reinsurance support from the London market. While a small number of fixed premium P&I covers for charterers have been cancelled, most have instead been repriced.

The LMA said the main reason vessels are avoiding the Strait is the operational risk environment rather than insurance availability.

Industry assessments referenced in the statement indicate that around 20,000 seafarers have been affected by the disruption, with at least 11 fatalities reported since the escalation began, including an incident involving a tug assisting an abandoned vessel.

Operational risks highlighted include vessels running low on fuel and provisions, uncertainty about the availability of salvage support, concerns over access to ports of refuge, and shortages of stabilising chemicals required by some tankers to maintain cargo safety.

Data from the Joint Maritime Information Center shows 23 maritime attacks involving commercial vessels and offshore infrastructure across the Arabian Gulf, Strait of Hormuz and Gulf of Oman since early March. The incidents involve multiple vessel classes and flag states, with no consistent ownership pattern identified.

Shipping data cited by the LMA also indicates reduced traffic through the Strait. Lloyd’s List intelligence covering vessels above 10,000 deadweight tonnes recorded 111 transits between early March and late last week, including 78 eastbound and 33 westbound voyages. The westbound movements were largely linked to sanctioned or shadow fleet vessels.

By vessel class, transits included 39 bulk carriers, 23 crude oil tankers, 16 container vessels, 14 product tankers, 10 gas carriers and nine other vessels.

Ownership data shows Iran accounted for 26% of vessel traffic, followed by Greece at 17% and China at 9%. The LMA said more than 60% of traffic is believed to have some form of Iranian nexus, including ownership links, flag exposure, sanctions connections or negotiated transit permissions.

In a separate update issued the same day, the LMA also confirmed revisions to several contingency insurance model wordings covering cancellation, non-appearance and events risks. The amendments include technical updates to exclusions relating to terrorism, civil commotion, communicable disease and cyber risks.

The association said the revised wordings are intended as guidance for managing agents, brokers and market participants, with contracting parties remaining free to agree alternative contractual language depending on individual risk assessments.

The statements underline the continued availability of insurance capacity for maritime trade through the region, even as security conditions continue to shape commercial shipping decisions.