Ship insurance companies cancel war risk coverage

Marine insurance companies reported yesterday that they had decided to cancel war risk coverage for ships. The companies: “Guard”, “Scold”, “North Standard”, the London Shipowners Association, and “The American Club”, stated in notices on their websites that the cancellations take effect from the day after tomorrow. For its part, Skuld said in its notice that it is working on the option to buy back the coverage.

For its part, Japan’s MS&AD Insurance Group told Reuters that it had suspended the issuance of a group of insurance policies covering war risks in waters near Iran, Israel and neighboring countries.

Tensions in the Middle East escalated sharply after US and Israeli forces launched raids on Iran over the weekend, prompting Tehran to say that it had halted navigation in the Strait of Hormuz, a vital waterway for global oil and gas flows. Following the announcement, many oil tanker owners, major oil companies and trading companies suspended shipments of crude oil, fuel and liquefied natural gas through this narrow waterway.

On normal days, tankers carrying oil equivalent to approximately one-fifth of global demand cross the Strait, in addition to tankers carrying diesel, jet fuel, gasoline, and other products to major Asian markets, including China and India.

“Markets recognize the seriousness of the conflict, but at the moment they consider it merely a geopolitical shock, not a systematic crisis,” said Priyanka Sachdeva, chief analyst at Philip Nova. An actual closure of the Strait of Hormuz for a long period would push oil prices higher and cause a shortage of supplies to China and India. Shipping data available the day before yesterday showed that there are more than 200 tankers, including tankers carrying crude oil and liquefied natural gas, in the open Gulf waters behind the Strait of Hormuz, in addition to the presence of dozens of other tankers on the other side of the strait.

The risks became more severe after at least three tankers were damaged off the coast of the Gulf, in addition to the death of a sailor.

In light of the continuation of the conflict, members of the OPEC+ alliance agreed to a modest increase in oil production by 206 thousand barrels per day during next April.

Analysts warn that retail gasoline prices in the United States, the world’s largest fuel consumer, may exceed $3 per gallon due to the conflict, which could pose a danger to President Donald Trump and his Republican Party before the midterm elections next November.