Insurance prices for oil tankers passing through the Strait of Hormuz could more than double, a leading broker told Semafor. Before conflict broke out over the weekend, insurance rates for most oil tankers in the region were around 0.25% of the value of the ship, said Marcus Baker, global head of marine and cargo for the brokerage and risk advisory firm Marsh. Now that Iranian forces have threatened to attack any ship entering the Strait, and followed through in several cases, many insurers are cancelling pre-existing war risk policies and looking to renegotiate at higher prices.
Although some insurers quickly angled for sky-high rates that Baker described as “nonsense,” the market hasn’t yet coalesced around a standard rate. But Baker said he expects that within the next day or so, rates will shake out at a level at least double what they were prior to the weekend. Still, he pointed out, that’s far lower than the eye-watering 5% rate that ships faced navigating the Black Sea at the beginning of the Ukraine invasion. Rates are likely to remain highly volatile until there’s a clearer indication of what the US Navy is willing and able to do, including potentially escorting convoys of tankers through the Strait. Even then, Baker said, some shipping companies and captains may decide that, insured or not, they simply don’t want to take the risk.