3MAY

War-risk cover sets a hidden cost floor

2 min read

14:52UTC

Western war-risk insurance has returned to the Gulf at 3 to 4% of hull value against 0.25% before the war, adding roughly a dollar to a dollar fifty a barrel to every VLCC cargo and setting a cost floor flat Brent does not show.

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Key takeaway

Returning war-risk cover embeds a dollar-plus-per-barrel cost floor on Gulf cargoes that flat Brent does not show.

Western marine war-risk cover returned to The Gulf shipping corridor at 3 to 4% of hull value by 22 June, against 0.25% before the conflict, twelve to sixteen times the pre-war rate ¹. War-risk insurance is the premium underwriters charge to cover a vessel crossing a conflict zone; at these levels the loading alone adds roughly $1 to $1.50 a barrel to the all-in delivered cost of a VLCC cargo. Mine clearance through Hormuz has not officially begun .

The transit counts and the mine-clearance timeline are the Iran desk's beat . A European freight desk carries the insurance loading directly, embedding a premium of a dollar or more a barrel into the delivered cost of every Gulf cargo. The flat Brent screen does not register that floor for eastern buyers, even as the screen treats the crisis as closed.

That embedded cost is part of why the forward freight curve has stayed anchored while the flat price fell: the tanker market is pricing the insurance and the physical risk, not the diplomacy. An insurance market still charging a war-risk multiple of this size is not one that believes the reopening is complete.

Deep Analysis

In plain English

Before a commercial tanker can sail, it needs two types of insurance. A hull and machinery policy pays the shipowner for physical damage to or total loss of the vessel. Protection and Indemnity (P&I) insurance pays for liability to third parties: crew injury, fuel spills, and damage to other vessels or port infrastructure. Banks that finance vessels and ports that accept them both require valid certificates for both types. Before the Hormuz conflict, war-risk insurance for Gulf transits cost roughly 0.25% of a vessel's hull value per voyage. On a large crude tanker worth $120 million, that was around $300,000 per crossing. This week, war-risk cover returned to the Gulf corridor at 3-4% of hull value, and P&I clubs have not yet reinstated standard terms for Hormuz transits at all. At 3-4%, the same $120 million tanker now carries $3.6 to $4.8 million in war-risk cost per voyage, translating to roughly $1-1.50 for each of the 2 million barrels on board. This extra cost does not show up in the $73 Brent crude price on the screen, but it is being paid by the buyers of Gulf crude on top of the headline price.

Deep Analysis

Root Causes

The 3-4% hull rate traces to three specific underwriting inputs that remain unresolved. First, the Lloyd's JWC "Additional Premiums" designation requires 30 consecutive days without a maritime incident in the listed area before a formal delisting review can begin; with 43 vessels still unaccounted for between CENTCOM and Kpler tracking as of 22 June , the JWC cannot start its 30-day incident-free clock because vessel status cannot be confirmed.

Standard P&I, North P&I, Gard, and Steamship Mutual have each issued Gulf withdrawal notices; without P&I cover a tanker cannot legally operate in any port requiring a valid club certificate.

Hull insurance pays for the vessel's physical structure; P&I pays for crew liability, pollution, and third-party damage, and no major bank financing a vessel will waive P&I as a loan covenant condition. A tanker operator who self-insures the hull still cannot satisfy port entry requirements or lender covenants without club membership.

Third, the 2023 Scandinavian Reinsurance Company (RNRC) precedent for Russian crude provides a structural parallel: after Western P&I clubs withdrew from Russian crude cargoes in 2022, Russia moved approximately 40 vessels to RNRC cover within three weeks; however, RNRC's capital reserves were insufficient to cover a catastrophic hull loss event, which is exactly the scenario P&I clubs are pricing at Hormuz.

The same capital-adequacy constraint applies to any non-Lloyd's substitute attempting to cover 270,000-tonne VLCC hull exposure in an active-conflict zone.

Source Landscape

This story draws on neutral-leaning sources from United States

United States

Consensus view: JLT Specialty (Jardine Lloyd Thompson's marine insurance advisory, one of the leading London market brokers for tanker war-risk placements) identifies two compounding and legally distinct insurance costs at Hormuz: the Lloyd's Joint War Committee (JWC) "listed areas" designation adds a mandatory 1.5-2% additional war-risk loading to any standard hull policy for Gulf transits, and separately, Protection and Indemnity (P&I) clubs, which cover third-party liability and crew welfare, have issued explicit notices of withdrawal for Hormuz transits; without P&I cover, no oil major or international charterer will send a flagged vessel into the strait regardless of hull-rate availability, because P&I certification is required for port entry in Rotterdam, Singapore, Fujairah, and all major bunkering hubs.

Counter-view: Norwegian Hull Club, one of the Scandinavian P&I underwriters that prices independently from the London Lloyd's market, has informally quoted specialist war-risk covers to Dubai-registered operators at 2.5-3.0% for specific vessel categories with Iranian-exemption riders; in the 2019 Gulf tanker attacks, Scandinavian clubs offered covers two weeks before Lloyd's formally reinstated standard terms; if the Norwegian clubs move first this cycle, the cost floor may compress to 2.5% faster than the 3-4% London rate implies, narrowing the embedded cost per barrel.

Key tension: Whether London P&I club reinstatement requires a formal JWC delisting of the Persian Gulf from its "Additional Premiums" listed-areas register (a process requiring 30 consecutive incident-free days), or whether individual operators can substitute Lloyd's cover with Scandinavian and Asian P&I alternatives that are already partially pricing re-entry at below-London rates.

Sources:Marine Insight·gCaptain

Mentions:Strait of Hormuz →BIMCO →TD3C →VLCC →London →Iran →Persian Gulf →Dubai →Fujairah →Singapore →Lloyd's Joint War Committee (JWC) →Protection and Indemnity (P&I) →Rotterdam →Brent-WTI →

First Reported In

Update #11 · Crude longs flushed flat into a loaded week

Marine Insight· 26 Jun 2026

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Causes and effects

Caused by

Dark tankers hug Oman past Hormuz

War-risk cover returned to Hormuz at elevated premiums consistent with the physical mine and permit constraints surfaced by the CENTCOM-Kpler 43-ship gap (ID:4422).

Occurred 22 Jun 2026

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This Event

War-risk cover sets a hidden cost floor

The insurance loading alone keeps the delivered cost of a Gulf barrel elevated for eastern buyers, a structural floor the flat Brent screen does not reflect.

Led to

Freight has not confirmed the spike

The 22 June war-risk premium reading is the last dated cover level against which the unconfirmed 10-13 July window is judged.

Occurred 13 Jul 2026

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Different Perspectives

Turkey

Turkey, a major buyer of Russian diesel cargoes, loses that access under Moscow's first producer-binding export ban, in force from 8 July to 31 July. Ankara hosted the same week's NATO summit pledging EUR 70bn to Ukraine, sitting on both sides of the fuel-and-alliance ledger.

NATO

NATO leaders meeting in Ankara on 7 and 8 July pledged EUR 70bn in equipment, assistance and training for Ukraine across 2026, with a 2027 sustainment commitment and a $40bn Drone Edge counter-drone initiative. European allies now fund the vast majority of that package, filling the gap left by Washington's idled crude waiver.

India

India's state refiners continued buying discounted Urals crude as June's price fell to $63.18 a barrel, insulating New Delhi from the OFAC waiver gap still constraining Western buyers. Indian refiners could pick up diesel-export share as Russia's producer-binding ban shuts out its former customers.

China

China's independent refiners kept importing discounted Urals crude through June as the price fell to $63.18 a barrel, down 26% month-on-month per CREA. Beijing has said nothing on Moscow's new diesel ban, leaving Chinese refiners a likely beneficiary if Turkish and Brazilian buyers seek replacement cargoes.

United States

No successor licence has been issued since General License 134C lapsed on 17 June, leaving a 26-day gap, the longest of the war, in the Russian crude waiver. Washington's silence is tightening the channel without any stated decision, as Treasury weighs whether to let it die.

Ukraine

Ukraine's long-range strike campaign shifted from refineries to seaborne fuel tankers crossing the Sea of Azov, cutting tracked vessel traffic 55% between 30 June and 11 July, per Starboard Maritime Intelligence. The shift targets Russia's export revenue directly rather than just domestic supply, adding pressure alongside the collapsing Urals price.