The compensation for vessel owners impacted by the Iran War has become one of the largest payouts in over a decade, with maritime insurance specialists estimating nearly $2 billion in war risk claims stemming from the conflict. David Osler, the Law & Marine Insurance Editor at Lloyd’s List, notes that there have been over 70 claims filed since hostilities began, and the payout could only be surpassed by the compensation related to a major container ship incident in Baltimore in 2024.
Notably, the International Maritime Organization has reported more than 72 attacks on vessels since the escalation of the conflict in March. Underwriters have expressed concern regarding potential multibillion-dollar liabilities from total-loss claims if unrest in the Strait of Hormuz continues. Consequently, war risk insurance premiums in this area have skyrocketed, increasing to levels 40 to 60 times higher than before the crisis, which has further impacted global oil prices.
As Saudi Arabia seeks alternatives to ensure its oil transport amid escalating maritime hostilities, the nation has expanded its East-West pipeline capacity, diverting a significant amount of oil away from the conflict zone. However, ongoing attacks on vessels connected to Saudi operations have prompted a shift toward a more costly pipeline route through Egypt to the Mediterranean, prolonging delivery times to Asian markets.
In response to the growing threats, underwriters have revised their war risk coverage areas, extending them further along the Saudi west coast. This revision also affects reinsurers, leading to tighter conditions that specifically exclude vessels associated with Saudi Arabia from standard coverage unless higher premiums are paid. Concerns have prompted discussions within the Saudi government about implementing a state-backed guarantee to address rising insurance costs, with ongoing negotiations taking place in London to explore potential solutions.
