Columnist

Hormuz: Safe passage - not insurance - the issue

Headquartered in Newcastle-upon-Tyne, NorthStandard insures approximately one-in-five oceangoing ships globally. 

Currently, around 400 of our shipowner members’ vessels are in the Persian Gulf. 

And so too are their crews.

On the same day as the US and Israel launched their Iran offensive in late February, vessels in the region received a radio transmission from Iran’s Islamic Revolutionary Guard Corps that no ship could pass through the Strait of Hormuz.

The Strait has now been effectively closed for 20 days. 

The Strait at its narrowest point is only 21 miles wide. It is bordered to the north by Iran and to the south by Oman, and is the only sea passage in and out of the Persian Gulf. 

The global significance of the Strait cannot be underestimated. 

While the impact of the Strait’s closure on oil has been well reported, given 20 per cent of global oil supply went through the channel prior to the conflict, it is also a key trade route for LNG, with about 20 per cent of global LNG trade passing through the Strait. 

Furthermore, around one-third of the world’s seaborne fertiliser trade is exported through the route. 

Without such fertiliser, global cereal production would decline, driving higher food prices and weakening food security worldwide. 

While a priority of the US and others, including the UK, is to restore freedom of navigation through the Strait of Hormuz, showing “guts”, as President Trump has suggested, isn’t the answer. 

Sir Keir Starmer has recognised it is “not a simple task” and Foreign Secretary Yvette Cooper has stated that restoring freedom of navigation is “separate from the conflict”. 

Merchant vessels will not pass through the Strait until it is considered safe. Shipowners will not be putting their crew and ships at risk. 

There are reports of 23 confirmed and three unconfirmed vessel attacks, 12 seafarers killed and three missing. 

It is a fast-evolving situation, and shipowners and charterers are looking to the terms of the war risk clauses in their contracts for vessels in the Gulf, or destined for the Gulf, to determine their contractual obligations. 

Contrary to various press reports, ships trapped in the region continue to be insured for losses arising from the usual marine risks, including hull and machinery and third-party liability cover.

Typically, these insurances exclude losses from weapons such as missiles and mines, so separate war risk insurance is placed.  

Where notices of cancellation have been served for war risk policies, this is simply the way in which insurers re-price the insurance where an area poses a material change of risk. 

The price may have changed, but the required insurances remain.

Lack of insurance is not the problem; lack of safe passage is. 

Helen Barden is director - external affairs at marine insurer NorthStandard

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