Tankers Are Sitting Ducks. The Insurance Market Just Collapsed.
All 12 members of the International Group of P&I Clubs have issued cancellation notices. 150 vessels are stranded. The price of a voyage is now measured in millions.
- All 12 members of the International Group of P&I Clubs, covering 90% of world ocean-going tonnage, issued 72-hour war-cover cancellation notices.
- Hull war risk rates hit up to 1% of ship value per voyage for Gulf operation alone — up to 10% at the peak for stranded tankers. Before the war, that cost was $125,000-$150,000.
- Around 150 vessels are stranded; at least five tankers damaged; two seafarers killed. The value of ships trapped in the Gulf is at least $25 billion.
Two weeks in, and the insurance market has told us everything we need to know. All 12 members of the International Group of P&I Clubs — the mutual marine insurers that collectively cover 90% of the world's ocean-going tonnage — have issued 72-hour notices of cancellation of war cover in the Gulf. Lloyd's Joint War Committee has expanded its high-risk designation to the entire Persian Gulf. The hull war risk market is quoting rates of up to 1% of ship value per voyage — for vessels that aren't even transiting the Strait, just operating in the Gulf. For a tanker worth $100 million, that is $1 million for a single voyage; before the war, that same coverage cost $125,000-$150,000. The market has repriced risk by a factor of seven in two weeks. At the peak of the crisis, some stranded tankers were paying 10% of hull value as additional war risk premium in mid-March. That is not insurance. That is extortion by mathematics.
At least five tankers have been damaged. Two seafarers have been killed. Around 150 vessels are stranded around the Strait. The UK Maritime Trade Operations Centre has logged over a dozen attacks on commercial vessels. The value of ships trapped in the Persian Gulf is at least $25 billion, according to Lloyd's Market Association estimates.
“Insurance collapsed not because of the attacks, but because of the architecture of the market itself.”
The interlocking P&I, reinsurance, and Joint War Committee designation systems are tightly coupled: a single conflict-zone designation triggers cascading cancellations across the entire market simultaneously. The physical threat doesn't have to be that large. The commercial cascade can be out of proportion to the kinetic reality — a mechanism I've come to think of through the lens of Chokepoint Economics: the market reprices the risk immediately, long before diplomacy or physical control catches up. The US government announced a $20 billion maritime reinsurance programme, with Chubb as lead partner. Moody's said it won't be enough, because it doesn't cover liability risk — without P&I liability cover, shipowners face the prospect of a tanker strike causing a spill worth more than their entire company, and management won't accept that exposure regardless of the premium. The Strait carries 3,000 vessels per month in normal times; in the first three weeks of March, 111 vessels transited, most of them Iranian-linked or sailing with AIS transponders switched off. That is a 96% collapse in traffic.