Global insurers are designating Iranian waters and the Persian Gulf region as high-risk zones following the Iran crisis, canceling war coverage special clauses for domestic and international shipping companies or demanding renegotiation. Financial authorities have also begun assessing domestic insurers' exposure to ships and cargo traveling to and from the affected region.
According to financial industry sources on the 4th, the Joint War Committee under the Lloyd's Market Association (LMA) designated the Persian Gulf, Arabian Gulf, Gulf of Oman, Indian Ocean, and Gulf of Aden as war risk areas on the 3rd (local time). The committee also expanded war risk countries from nations adjacent to conflict zones such as Iran, Iraq, and Israel to include Kuwait, Oman, and Qatar, effectively covering the entire Middle East region.
The Joint War Committee's risk designation serves as the benchmark for determining premiums and coverage terms when individual insurance contracts are concluded, as most major global reinsurers follow London reinsurance market conditions. Insurers have tightened their requirements after five vessels were struck on the 1st and 2nd of this month, immediately following the outbreak of war, resulting in casualties and fires.
Under these measures, existing war risk coverage contracts for vessels operating in the region will be canceled, and shipowners must pay additional premiums and re-enroll to maintain coverage. While rates for the relatively safe Fujairah coast in the United Arab Emirates stand at around 0.0155%, vessels entering deeper into the Persian Gulf face rates of 0.0625%—more than four times higher. If contracts are not renewed within 48 to 72 hours after cancellation notice, claims will not be honored even if incidents occur.
"The Strait of Hormuz area has become dramatically more dangerous, so we have no choice but to charge premiums different from those before the crisis," said an insurance industry official. "Even if shipowners pay the higher premiums, it won't be easy to operate in the region."
The Financial Supervisory Service is conducting a comprehensive survey of domestic insurers' contract positions on vessels and cargo in coordination with the General Insurance Association of Korea.