Jonathan Moss, head of marine and trade at legal firm DWF has said that the latest chapter of turbulence in the Middle East would lead to insurers and reinsurers, particularly in lines such as hull, war, piracy, terrorism, cargo and construction raising premiums, renegotiating terms of cover and introducing riders and endorsements to policies to reflect the increased risks of trading in the region.
“Insurers and reinsurers have been looking for a marked correction to the downward pressure on rates. The recent tensions, however, will lead to insurers and reinsurers imposing draconian conditions in policies, significantly increasing the costs of specialist insurance and pulling out of underwriting certain lines of business. Insurance rates are set to increase exponentially in the coming months,” said Moss
He noted that ships would have to navigate longer routes to avoid dangerous areas, Crews’ wages would rise owing to the heightened risks of attacks to Vessels in the Strait of Hormuz, and this would add costs to end consumers for commodities transported globally, thus hampering trade.
Moss said that, following the May 12th attacks on two Saudi tankers, a Norwegian and a UAE flagged vessel, the Joint War Committee added the Gulf to its list of high risk waters. Insureds were instructed to notify underwriters before vessels entered the region and additional premiums started to be levied. “The attacks have transformed the region for insurers”, said Moss.
He noted that insurers had not withdrawn completely from writing risks, but said that each international insurer was taking a close interest in how events unfolded.
The events of last year increased insurance premiums by an average of 10% in six to seven months.
“The fact that all UK flagged ships in the Strait of Hormuz are being escorted by UK navy vessels has done little to restore the status quo. Previous attempts to contain the aggression have had little effect in stemming the flow of the meteoric rises in premium. “A new period of disorder and unrest means that an unpredictable and turbulent picture is emerging with the inevitability that insurers and reinsurers will choose to exit insurance lines and/or adopt pricing models which will have an adverse impact on the passage of trade, increasing costs for the end consumer”, concluded Moss.
Meanwhile, as of 12:00 (JST) of 9 January 2020, the ports in Iran, UAE, Oman, Kuwait and Saudi Arabia are operated normally and no sea blockade has been carried out by surrounding countries. In addition, the Authorities have not issued any circular or notification regarding the safety or navigational issues for vessels so far.