War and terrorism rates spike in Arabian Gulf

Oil and gas shipowners are facing an increase in rates to transit the Strait of Hormuz and surrounding areas after this week’s escalation in the dispute between the US and Iran.

“We are obviously concerned with regard to the tension around the wider (Gulf) area,” Svein A Ringbakken, managing director of Norwegian ship insurer Den Norske Krigsforsikring for Skib (DNK) told Reuters.

Shipowners pay an annual war-risk insurance cover, but have to pay additional ‘breach’ premiums if their vessels enter an area deemed to be high-risk. These separate premiums are calculated according to the value of the ship, or hull, for a seven-day period.

A London-based shipbroker told Reuters that insurers had been quoting a breach rate for seven days at around 0.35% of insurance costs, up from about 0.15% in December. Depending on the type of ship, that could add about $150,000 to $200,000 to overall costs per trip, one Singapore broker said.

Brazilian state-controlled Petrobras said on Wednesday January 8th that its ships would avoid transiting the Strait of Hormuz. They reached the decision following a consultation with the Brazilian Navy.

Meanwhile, Maritime Security Communications With Industry (MSCI) issued a notice on the threat to commercial vessels from Iran and its proxies.

The guidance generally as to shipboard vigilance was released this week for the Persian Gulf, Strait of Hormuz, Gulf of Oman, Arabian Sea, Red Sea, Gulf of Aden, and Indian Ocean.