Persian Gulf Faces Maritime War Risk Insurance Crisis

Rising geopolitical tensions in the Middle East have triggered a significant withdrawal of war-risk insurance coverage for vessels operating in the Persian Gulf, sparking new concerns within the international insurance sector. This development, analysts warn, could increase potential credit and financial risks, particularly for U.S.-based marine insurers, according to global rating agency Fitch Ratings.

Fitch’s analysis indicates that U.S. property and casualty insurers heavily reliant on premiums from ships navigating the Gulf are most vulnerable to financial pressure. Conversely, global reinsurance firms with diversified portfolios, where marine war-risk represents only a small fraction of overall revenue, are expected to face comparatively limited impact.

The escalation in the region stems from ongoing military tensions, elevating security risks along critical shipping lanes such as the Persian Gulf and the Strait of Hormuz. These waterways are vital: roughly 20% of the world’s oil supply and significant volumes of liquefied natural gas transit through the Strait. Additionally, about 30% of the global trade in nitrogen-based fertilisers passes through this corridor. Any disruption could therefore have far-reaching consequences, affecting not only the insurance sector but also global energy and trade markets.

Insurance analysts estimate that approximately USD 22.5 billion worth of vessels currently face risk exposure in the Persian Gulf. In a worst-case scenario involving multiple large oil tankers or cruise ships sustaining total loss, global insurance industry claims could exceed USD 5 billion.

As a result, numerous insurers have either suspended or limited war-risk coverage for the region, forcing ship owners to seek new policies at sharply increased premiums. In many cases, additional premiums may reach up to 1% of a vessel’s value, translating into several hundred thousand dollars extra per voyage.

To mitigate these risks, the U.S. government has launched a special reinsurance programme designed to provide up to USD 20 billion in financial backing. The initiative aims to maintain commercial shipping operations and limit potential large-scale losses for insurers.

The table below summarises key financial indicators linked to the current crisis:

Experts caution that the impact over the next 12 months will largely depend on two factors: the duration of the conflict and the length of shipping disruptions. Prolonged tensions could increase the risk of vessels being detained, damaged, or seized, placing substantial strain on insurers’ earnings and capital management.

However, international reinsurance firms with strong capital positions and diversified operations are considered better equipped to weather the crisis. Should regional stability return, market equilibrium could be restored; yet for the time being, the Persian Gulf’s war-risk insurance shortage remains a significant uncertainty for global maritime commerce.