President Donald Trump has offered US-backed insurance and naval escorts for vessels crossing the Strait of Hormuz. However, the move hasn’t assuaged the insurance sector from increasing maritime premiums and reassessing risks.
The Strait of Hormuz has closed due to incessant attacks following the US-Israeli-led attack on Iran. The maritime passageway is critical to global energy supply since it handles 20% global oil supplies.
The US proposes that it provide insurance at a very reasonable price to guarantee financial security for all maritime trade. Naval escorts will provide safe passage for tankers in the Strait of Hormuz.
The insurance industry says that the proposal is unclear. The finer details of the scheme will need to be worked out while the appetite for the US-backed scheme is unknown. Naval escorts will only increase the risk to shipping. The US military assets remain a big target for Iranian missile attacks.
Rising premiums reflect the heightened risk in the Gulf, with some reports even suggesting a 12-times increase. It is necessary for underwriters to reassess their positions given the new risks.
