Hormuz Crisis Drives War Risk Insurance Premiums Up to 10%

The security crisis in the Strait of Hormuz and the Red Sea has escalated to a critical level. Shelling of commercial vessels has spread deep into the Persian Gulf, while missile and drone strikes on international airports in Saudi Arabia and Yemen have forced aviation and marine underwriters to radically reassess war risks. Marine war risk insurance premiums have surged to an unprecedented 6% to 10% of a vessel's hull value, turning a single supertanker voyage into a financial operation costing up to $20 million in insurance expenses alone.

A turning point occurred with an attack on a tanker 51 nautical miles north of Madinat ash Shamal on Qatar's northern coast. According to the UK Maritime Trade Operations (UKMTO) centre, the vessel was struck by multiple projectiles, resulting in crew casualties. Analysts note that the geography of attacks is expanding west of the Strait of Hormuz, and the tactics have shifted: strikes are now aimed directly at crew quarters to maximize casualties rather than disabling engines. This has severely shrunk the pool of seafarers willing to sail. To compensate for the mortal danger, shipowners are offering captains up to $100,000 a month and $50,000 bonuses per crossing, compared to normal rates of $15,000. Ordinary crew wages have increased four to six times.

Simultaneously, the aviation sector has faced severe disruption. Yemen's Houthis launched drone and missile strikes on Saudi Arabian international airports. One person was killed at King Khalid International Airport in Riyadh, and two died at Abha airport, with dozens injured. Aden's international airport in Yemen was also targeted. The European Union Aviation Safety Agency (EASA) has issued a conflict zone bulletin advising operators to avoid flights in designated areas. For the London aviation insurance market, this comes at an awkward time as insurers still work through billions in claims from aircraft stranded in Russia, while Middle East route war risk rates have already risen by 10% or more even for lower-risk carriers.

For actuaries and underwriters, these events necessitate a complete overhaul of risk aggregation models and catastrophe loss scenarios. Traditional approaches separating marine and aviation portfolios are failing under coordinated attacks on regional transport infrastructure. In the marine segment, war risk premiums for Saudi-linked tankers in the Red Sea have climbed to 3% of hull value (about $3 million per voyage), while non-affiliated vessels pay 0.2% to 0.3%. In the Strait of Hormuz, rates reach 10%. The total volume of insured exposure passing through these chokepoints requires reinsurers to strictly limit capacities.

The reduction in shipping traffic through the Strait of Hormuz—the world's key energy chokepoint—has dropped daily transits to 13 vessels, down from 135 before the conflict. Although some exports are rerouted via pipelines, the soaring costs of freight, fuel, and insurance are inevitably baked into crude prices. For Kazakhstan and Central Asia, this crisis highlights the vulnerability of global supply chains and directly impacts the cost of reinsurance protection acquired by local insurers on the international market.

Actuarial Takeaway: A surge in war risk rates up to 10% of vessel hull value illustrates extreme tail-risk realization in narrow strategic choke points. Marine actuaries and enterprise risk managers must recalibrate aggregation limits and account for severe transit volatility in supply-chain capital allocation models.