As tensions between the US and Iran in the Persian Gulf continue to escalate, marine insurers have paid out over US$100 million in claims stemming from tanker attacks and seizures.
According to the Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK), war risk premiums have increased ten-fold in 2019, with vessels sailing the Strait of Hormuz having to pay between US$300,000 and U$$400,000 each voyage.
“The cost of shipping in one of the world’s busiest waterways has gone up substantially and we don’t expect an easing of tensions anytime soon,” DNK managing director Svein Ringbakken told the Wall Street Journal.
Around 20% of the world’s supply of crude oil is shipped by tankers through the Strait of Hormuz, which links the Persian Gulf and the Indian Ocean. Tensions in the region began to flare up following attacks on Norway-flagged tanker Andrea Victory and other vessels in the port of Fujairah in the United Arab Emirates.
Meanwhile, a Singapore-based ship broker said that the rise in war risk premiums has eaten into already slim profit margins, which may make voyages financially untenable. Supertanker freight rates from the Persian Gulf to Asia cost around US$42,000 daily. The round trip between these destinations takes around two months.
“If you take out the war-risk premium for the trip, crew expenses and fuel, the ship owner makes a low single-digits profit at most,” the broker told WSJ. “In other parts of the world, supertankers command between U$20,000 and US$25,000 at most. The cost is more than they make.”
