A growing disruption in global shipping is unfolding as the West Asia conflict pushes up marine insurance costs and, in some cases, leads insurers to withdraw cover altogether.
What is unusual this time is where the pressure is coming from. It is not just oil prices or blocked routes. Insurance, usually a back-end part of trade, is now determining whether ships can sail at all.
War-risk premiums for vessels passing through key routes such as the Strait of Hormuz have surged from about 0.2–0.25% of a ship’s value before the conflict to around 1% or more in recent weeks, according to estimates from Marsh McLennan and analysis cited by The Economist Intelligence Unit.
In some cases, premiums have risen to about 3% depending on risk exposure.
To understand the impact, consider this. A large oil tanker can be worth Rs 1,500 crore to Rs 2,500 crore. Even a 1% insurance charge means tens of crores added to the cost of just one trip.
The Strait of Hormuz, which handles roughly a fifth of global oil trade, has become a .
Shipping companies are already responding. Many vessels are avoiding high-risk zones or taking longer routes around Africa, adding 10 to 15 days to journeys and significantly increasing fuel and operating costs, according to data tracked by Clarksons Research, a global shipping services and data analytics firm.
The problem is not just higher prices. In some cases, insurance is no longer available.
Major marine insurers, including protection and indemnity clubs such as Gard, Skuld and NorthStandard, have withdrawn war-risk cover for vessels operating in parts of the Gulf, according to news agency Reuters.
This matters because ships cannot operate without insurance. It is required for cargo financing, port entry and most commercial contracts.
When cover is withdrawn, shipowners are left with two options. Either they find alternative insurance at much higher rates, or they avoid the region altogether.
Both options disrupt trade.
The surge in premiums has made marine insurance one of the biggest cost drivers in shipping.
Unlike earlier, when premiums were relatively stable, pricing is now changing .
Insurers are reassessing risks frequently, and policies are often priced per voyage depending on how long a vessel stays in high-risk waters.
“Currently there is no capacity in the Indian market to cover the war risk. We approach international markets for covering the war and SRCC risk,” said Amin Mazagonwalla, President, Business Development at Alliance Insurance Brokers.
“These risks are in terms of weekly, fortnightly or monthly rates depending on the appetite of the client and how long the vessels are likely to be stationed in the Middle East,” he added.
Companies are now reworking how they approach insurance as risks rise across the system.
“The ongoing tensions in West Asia have triggered a renewed sense of risk awareness across businesses of all sizes. Today, there is a clear shift towards adopting well-structured marine cargo insurance programs that explicitly cover war and strike-related risks,” said Balasundaram R, Head of Marine Insurance at Policybazaar for Business.
He added that clients, brokers and insurers are closely re-evaluating policy wordings to ensure greater clarity and certainty in coverage.
“In an environment where transit risks are rising, driven by geopolitical disruptions, extreme weather events, increased cargo handling, vessel fire incidents, and traditional maritime perils, a comprehensive cargo insurance policy is no longer optional, but essential,” he said.
Balasundaram also pointed to an often overlooked risk.
“Even if cargo arrives safely, businesses may still be required to contribute towards shared losses or expenses incurred to save the voyage. Without insurance, this can mean significant out-of-pocket costs or delays in cargo release,” he said, referring to the concept of general average.
The impact of rising insurance costs does not stay within shipping. Higher premiums increase freight rates. Higher freight rates increase the cost of imports. That eventually feeds into prices of fuel, fertilisers and everyday goods.
At the same time, delays caused by rerouting and insurance constraints are slowing supply chains.
What is emerging is a shift where insurance is no longer just a safeguard, but a central factor shaping how global trade moves.
“In an environment where transit risks are rising, a comprehensive cargo insurance policy is no longer optional, but essential,” said Balasundaram R.
Nowhere is this shift more visible than in the Strait of Hormuz, where the war has turned a key oil route into a chokepoint for risk, with insurance increasingly shaping the cost and flow of global trade.