Quills and Conflict: Lloyd’s of London Navigates Hormuz Crisis
Quills and conflict – Within a sleek, modern structure situated in central London, centuries of maritime history are preserved in leather-bound volumes. These “Loss Books” document vessels that have vanished from the seas over a quarter-millennium, with entries still penned by hand using quill pens by employees called “waiters.” One such record captures the sinking of the Titanic in April 1912. Lloyd’s of London provided coverage for the legendary vessel at £1 million, which translates to approximately £101.6 million in contemporary currency. For over three hundred years, this institution has stood at the center of global marine insurance, and now faces renewed challenges as Quills and conflict reshape maritime risk.
When Tehran imposed a blockade on the Strait of Hormuz on February 28, reacting to coordinated strikes by the United States and Israel, the Lloyd’s market responded with remarkable speed. Overnight, the dangers of navigating through the strategic waterway escalated dramatically, forcing insurance premiums to adjust accordingly. War coverage policies were temporarily suspended and then reinstated at substantially elevated rates.
Following a period of relative stability and recovering transit volumes, recent events in the Strait of Hormuz have once again shifted the risk landscape.
Surging Premiums and Rapid Policy Adjustments
David Smith, who leads the marine division at London-based broker McGill and Partners, noted that underwriters are carefully examining both pricing and individual risk factors following renewed Middle Eastern strikes this week.
The financial impact on shipping companies has been immediate and substantial. Marcus Baker, Marsh’s global head of marine and cargo insurance, reported that rates for vessels traversing the strait jumped to as much as 10% of a ship’s total value, compared to the previous range of 0.25% to 0.5%. For an oil tanker valued at $100 million, Baker explained, this represents a $10 million voyage. Hull war rates, which protect a vessel’s physical structure against conflict-related damage, have since moderated to between 1% and 3% of a ship’s worth. Additionally, some underwriters have introduced “no-claims bonuses,” refunding half the premium to ship owners whose vessels pass through without incident.
War insurance premiums will track exactly what is happening geopolitically… almost on an hourly basis.
Smith emphasized that underwriters covering ships intending to cross Hormuz now aim to finalize policies just six hours before departure, a significant reduction from the standard 24 to 48-hour window. Once issued, these policies remain effective for only three to seven days before requiring renegotiation.
In one remarkable instance, Smith recounted receiving a phone call from a ship owner seeking same-day coverage for a potential strait crossing under US Navy guidance. After quoting a price and waiting, the owner called back that afternoon to confirm the voyage and activate the insurance. The critical detail? The vessel was scheduled to enter the strait within six minutes of that confirmation call. Smith described how he and three fellow brokers spent ten minutes “screaming at underwriters on the phone” before securing the certificate of insurance, which was promptly delivered to the command deck. The crew demanded to review the policy personally, wanting assurance that their families would receive compensation if tragedy struck during the dangerous passage.
While that particular ship navigated the waters safely, the human toll has been significant. According to the International Maritime Organization, at least 14 seafarers have lost their lives since hostilities began. Neil Roberts, head of marine and aviation at the Lloyd’s Market Association, reported that more than 50 ships have been targeted in the waterway, though none recorded in this year’s Loss Book have been completely destroyed. Most ship owners have chosen to avoid the strait despite insurance availability, given the persistent threat of attacks.
Lloyd’s does not anticipate catastrophic losses for insurers, though substantial risks persist. These include underwater mines, continued US-Iranian military exchanges, and challenges posed by newly established, sometimes narrow, navigation routes. Allianz reported last month that approximately 1,150 cargo vessels carrying an estimated $125 billion in combined ship and cargo value remain anchored in the Persian Gulf. Should the conflict extend for additional months, a considerable portion of these vessels could become stranded indefinitely.
