Tanker insurance costs double for Strait of Hormuz passage following attacks
Insurance costs for ships sailing through the Middle East have soared following the attacks on two tankers in the Gulf of Oman, according to Reuters.
Insurance premiums are up by an average of 10%, but larger VLCC tankers have been hit hardest, with insurance costs doubling to as much as US $200,000 per voyage.
The attacks have stoked concerns about reduced flows of crude oil on one of the world’s key shipping routes, pushing up oil prices by as much as 4.5% and leading to some tanker companies suspending new bookings for the Middle East.
Ship insurers say the biggest tankers sailing through the Strait of Hormuz face additional costs of up to US $200,000 for a single seven-day voyage, roughly twice as expensive as earlier this week as a direct consequence of last week’s attacks.
“The facts on the ground have changed. If any of those tankers sink, you will see a rise across the board in the annual war premiums,” one underwriter said. “This is not the first incident, and what we are seeing (with rates going up) reflects the worsening situation in the area.”
Annual war-risk is one of several forms of insurance a merchant vessel needs when sailing into regions perceived as dangerous. Another is a ‘breach’ premium, which covers the potential cost of a hull breach, such as that suffered by the two tankers that were attacked.
These separate premiums are calculated according to the value of the ship, or hull, for a seven-day period. The larger the ship, the more expensive, and therefore the higher the premium.
Last month, the London insurance market’s Joint War Committee extended the list of waters deemed high risk to include Oman, the United Arab Emirates and the Gulf after separate ship attacks off Fujairah, during which four tankers were breached.