Inside Lloyd’s of London, clerks still record major shipping losses by hand in leather-bound ledgers using a swan’s quill—a tradition stretching back more than two centuries. Today, those ledgers are documenting a different kind of crisis as the Strait of Hormuz enters its sixth month as the world’s most expensive shipping corridor.
The real story isn’t the conflict itself. It is how that conflict is being converted into dollars.
War-risk insurance has quietly become one of the biggest variables influencing the cost of moving oil, liquefied natural gas and cargo through the Middle East. Every increase in those premiums eventually finds its way into fuel prices, freight costs, fertilizer, plastics and countless products businesses and consumers buy every day.
Lloyd’s of London sits at the center of that market.
Rather than operating as a traditional insurance company, Lloyd’s functions as a marketplace where syndicates of investors assume portions of shipping risk while brokers negotiate coverage vessel by vessel. For more than three centuries it has been the financial nerve center of global marine insurance, setting prices that often determine whether ships sail, wait—or stay away entirely.
Everything changed after the U.S. and Israeli strikes on Iran on February 28, when Tehran responded by threatening commercial traffic through the Strait of Hormuz.
Marine insurance contracts contain cancellation clauses that allow underwriters to terminate existing war-risk coverage with short notice and immediately reprice policies to reflect changing conditions. That mechanism is what allows premiums to remain negligible during peacetime and rise almost overnight when conflict erupts.
The numbers illustrate how dramatically the market has changed.
Before the conflict, additional war-risk premiums for a Hormuz transit typically hovered around 0.25% of a vessel’s insured value.
Today, brokers report premiums ranging from 3% to 10%, depending on the ship, cargo, ownership and destination.
For a tanker insured for $100 million, that represents a jump from roughly $250,000 per voyage before the conflict to between $3 million and $10 million today. For some modern very large crude carriers carrying politically sensitive cargo, individual voyages have reportedly generated insurance bills exceeding $10 million.
The market has also changed how it prices risk.
David Smith, head of marine at London broker McGill and Partners, has said underwriters increasingly wait until only a few hours before departure to determine pricing rather than issuing policies a day or two in advance. Many policies now remain valid only for several days before requiring renegotiation, reflecting how quickly military conditions can change.
Some insurers have adopted unusual approaches to keep commerce moving.
Marcus Baker, global head of marine, cargo and logistics at Marsh, has described arrangements where underwriters refund as much as half the premium if a vessel completes its voyage without incident—a rare structure intended to preserve shipping traffic while acknowledging extraordinary wartime risks.
The economic consequences extend far beyond the Persian Gulf.
Roughly one-fifth of the world’s seaborne oil and liquefied natural gas normally passes through the Strait of Hormuz, along with chemicals, fertilizers and containerized freight. Every additional dollar paid for insurance becomes part of the delivered cost of energy, transportation and manufacturing around the world.
In response, Washington entered the insurance market itself.
President Donald Trump directed the U.S. International Development Finance Corporation to establish political-risk insurance and maritime guarantees supporting commercial shipping through the Gulf. Working alongside private insurers led by Chubb, the government-backed program was initially structured around $20 billion in reinsurance capacity with the ability to expand substantially if needed.
The initiative also represents something larger.
For generations, Lloyd’s of London has effectively served as the world’s financial backstop for maritime commerce. By creating a government-supported alternative, Washington signaled that maritime insurance has become a strategic national-security issue rather than simply a commercial product.
Lloyd’s disputes suggestions that private markets have failed.
The Lloyd’s Market Association maintains that insurance capacity has remained available throughout the crisis and argues that many vessels avoided Hormuz because of security concerns rather than an inability to obtain coverage. Market leaders continue to insist private insurers remain capable of supporting global shipping even during prolonged geopolitical conflict.
The broader business story reaches far beyond insurance.
Wars do not affect the global economy only through damaged pipelines or disrupted shipping lanes. They also reshape the financial mechanisms that make international trade possible. Insurance is one of those mechanisms.
Every increase in a Hormuz war-risk premium eventually appears somewhere else—in refinery costs, airline fuel bills, trucking expenses, fertilizer prices, manufacturing inputs and consumer goods.
In today’s shipping market, insurers are no longer simply pricing risk.
They are helping determine the cost of global commerce.
JBizNews Desk | London
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