In the news roundup for September 30, three lines stood one after another: a tanker transiting Hormuz was struck by an unidentified projectile, an IRGC representative said Iranian forces attack ships “every 24 hours,” and Iraqi tankers were granted no exceptions. What stayed with me was the fourth line, the one absent from the news — it sat in the analysis between the lines: the price of the strait is calculated in per-voyage insurance premiums.
A week earlier, another item flashed a phrase about a war premium on oil that “costs less than a missile.” Both times, these were metaphors: no one explained who sets that premium, what makes up the number, or why it is that number that determines whether a ship sails or stays put.
The hypothesis worth testing: the main switch for global shipping is neither a fleet nor an admiral, but an underwriter holding two tools — the ability to refuse to name a price at all, and to cancel a policy with seven days’ notice.
A vessel is insured through a stack of policies: hull, third-party liability (P&I), cargo. War risk sits separately in that stack, and a standard annual war-risk policy does not cover calls at areas the market has declared dangerous. To pass through such an area, the shipowner buys a second premium — separately, for a specific voyage. “The annual policy is not designed for a crisis,” said Neil Roberts, head of marine at the Lloyd’s Market Association.
That premium is the strait’s real price tag. It is calculated as a percentage of the vessel’s insured value, which means it rises with the price of the ship. Before the conflict, the additional premium for passage through the Persian Gulf hovered around 0.25% of the vessel’s value — according to Marcus Baker of Marsh. For a $100 million tanker, that is a quarter-million per voyage.
Then comes a discrepancy worth keeping in mind. One market analysis puts the prewar range at 0.05–0.2%; another agency writes “less than one percent.” This is not one side getting it wrong: war risk has no single quote, like oil — every deal is priced by hand, and the “market price” here is always someone’s specific conversation.
But in current quotations, the sources agree on the order of magnitude and differ only on the range: from 3 to 10% of the vessel’s value. Marsh in July: “anything above three percent and potentially up to 10.” Two independent brokers in March cited 1–5% and 3.5–10%. At the upper end, a $100 million tanker pays $10 million for a single passage instead of $250,000; a 270,000-deadweight-ton supertanker worth $210 million pays around $21 million to cross.
Baker translated the percentages into plain language: a 10% premium means the market sees the chance of being hit during the voyage as roughly one in ten. No political wording gives you a number that direct.
There is a detail in this pricing that explains the profession better than any description. Broker David Smith said some quotes arrived with a stipulation: the vessel must pass through the strait at full speed — the underwriter treated speed as an improvement in risk and wrote the requirement into the policy. Shipowners used to have 24 hours to bind a quote upon entering a danger zone; for Hormuz, it is now 12. “You line up the ship, start the engine, prepare to get underway — and only then do you receive your price,” he described the procedure. And he added the crucial part: there are almost no buyers; one underwriter reported that less than 1% of offered quotes had been bound.
The list of places where war is considered switched on is maintained not by a ministry and not by the UN. It is maintained by the Joint War Committee — a committee under the Lloyd’s Market Association and the International Underwriting Association (IUA), made up of underwriters and working with outside security consultants. It publishes a list of areas for hull war-risk, piracy, and terrorism cover.
What it looks like in a document. Circular JWLA-033 of March 3, 2026, adds Bahrain, Djibouti, Kuwait, Oman, and Qatar to the list and redefines the zone of the “Persian/Arabian Gulf, Gulf of Oman, Indian Ocean, Gulf of Aden and southern Red Sea” — coordinate by coordinate, down to minutes and seconds. The final line of the circular strips away any illusion that this is law: “application of this list to individual contracts will be subject to specific negotiation.”
The state enters this system later and from below. Inclusion on the list does not prohibit sailing: it merely means the base policy no longer applies and a separate deal is required. Formally, the strait is open. In reality, every passage becomes a one-on-one negotiation.
This mechanism is not new. On October 23, 1987, the War Risks Rating Committee — the predecessor of the current committee — meeting after an Iranian strike on a Kuwaiti marine terminal, raised the rate for cargoes bound for ports in Kuwait and northern Saudi Arabia from 0.50% to 0.75% of cargo value. Three years earlier, Lloyd’s had raised the premium on cargoes headed for Kharg Island from 2% to 3%, calling it an increase “of 600 percent since the beginning of March.” At the same time, the Lloyd’s Shipping Syndicate put losses from eight attacked neutral vessels at $80 million, while analysts wondered what would halt tanker traffic through the Gulf first — rising insurance rates or fresh damage to ships. Even then, the premium ran ahead of the chronicle.
The standard hull war-insurance terms — the Institute War and Strikes Clauses, 1995 edition — contain clause 6.1, which is worth reading verbatim: “This insurance may be cancelled by either the Underwriters or the Assured giving 7 days’ notice.” The policy can be reinstated, but only by agreeing a new rate. In other words, the policy lives not until an incident, but until notice — and notice can come from either side.
There is also a clause that turns the calendar into accounting: if a vessel is captured, detained, or arrested, and the owner loses the ability to dispose of it for 12 consecutive months, the vessel is deemed a constructive total loss.
Nothing sank — a year simply passed.
This is how it worked in practice on March 5, 2026, at 00:01 GMT: six mutual liability clubs — Gard, Skuld, NorthStandard, London P&I, American Club, and Steamship Mutual, together linked to roughly 80% of the world ocean-going fleet — issued cancellation notices for those war-related extensions they could withdraw unilaterally: charterers’ liability extensions and similar add-ons. Some notices gave 72 hours. The clubs could not withdraw core liability cover, including policies under pollution conventions — it is protected by the pool and cannot be cancelled mid-term.
The International Union of Marine Insurance adds one qualification: the very name “cancellation notice” does not mean coverage must necessarily end — war-risk cover remains available to those willing to take it on new terms. The difference between “there is no insurance” and “there is insurance at a new price” is the entire mechanism.
Then the arithmetic is taken over by logisticians. According to an analysis compiled in June, daily transits through the strait fell from around 138 to 10–20; more than 800 vessels piled up at the entrance; over 40 days of war, more than 22 ships were struck.
A premium is never compared with zero — it is compared with the cost of going around. Two years ago, this comparison had a clean test range: the Red Sea. By September 2024, after more than 70 attacks, two ships sunk, one seized, and at least three seafarers killed, additional passage premiums had risen to 2% of the vessel’s value from 0.7% at the start of that same month, while some underwriters simply suspended cover on that route.
The market’s response did not come in protest letters. By February 2024, around 80% of Red Sea traffic had vanished: ships went around Africa, adding roughly 3,300 nautical miles and 12–14 days to the Asia–Europe route, burning an extra $500,000 to $2 million in fuel per voyage and taking 10–15% of tonnage off the market — simply because, instead of two voyages, a ship at sea manages one and a half.
There is a place in these calculations where the numbers do not add up. Estimates of the cost of detouring differ threefold: some calculations put the extra fuel at around $500,000 per voyage, while HMM and SM Line reported $1.5–2 million. The reason for the discrepancy is what exactly is being counted: tons or foregone voyages. One analysis with tables reaches the conclusion that going around Africa is “cheaper under normal conditions” — and that is already an arithmetic artifact: 12–14 lost days do not fit into such tables.
But the switching point itself is clear: once the war-risk premium rises beyond roughly 1% of the vessel’s value per voyage, going around the Cape of Good Hope stops being more expensive. In Hormuz, there is nothing to go around — there is no alternative route, only the alternative of not going.
While underwriters count ships, people are counted aboard them. Crews have their own document: a list of danger areas maintained by the International Bargaining Forum — a platform of the International Transport Workers’ Federation and shipowners’ associations. It is structured differently from insurance.
In the list agreed on September 17, 2026, and extended until October 8, item 7 — “Persian Gulf, Strait of Hormuz and Gulf of Oman” — is a war-operations zone. For entering it, the crew is entitled to a bonus equal to the basic wage rate, for a minimum of five days and then for every subsequent day; death and disability compensation is doubled; the crew has the right to refuse the voyage, with repatriation at the company’s expense and payment of two months’ wages; the shipowner must raise security to a level comparable with ISPS level 3.
Item 8 — the “elevated risk area,” the outer band of the Gulf of Oman — works altogether differently: the bonus is paid only for the day on which the vessel is attacked. The difference between two items in the same document is the clearest contract on fear: somewhere, they pay extra for entry; elsewhere, for being hit.
Alongside this runs the human side of the bill. As of July, around six thousand seafarers remained trapped in the region, and the International Maritime Organization was working to get stranded vessels out through safe routes. Meanwhile, the Lloyd’s Market Association stressed separately in March that reduced traffic was explained by risk assessments made by masters and owners; in this picture, there is no shortage of insurance.
By this point, passage through Hormuz had acquired a second price list, and this one is state-run. Reports examined by Steamship Mutual describe Iran’s “Persian Gulf Strait Administration” (PGSA) — a body requiring vessels, before beginning transit, to complete a questionnaire with details of ownership, management, insurance, cargo, crew, and intended voyage, and also to obtain passage permission. A separate “fee” is mentioned — an administrative payment or transit tariff. Iran is thus inserting itself at the same point where the underwriter sits: in the paperwork.
Then comes the shipowner’s dilemma. On April 28, 2026, the US Office of Foreign Assets Control (OFAC) issued guidance on payments for safe passage, and on May 27 placed this Iranian body on its sanctions list. The club warns that any direct or indirect payments create sanctions risks and affect financing, insurance, and claims handling. Which means that one strait requires two policies — a London one and a Tehran one — and buying the second may nullify the first. A vessel’s insurability now depends on whose orders it obeyed.
The private market found a private answer. On June 19, Lloyd’s announced the creation of a Chubb-led consortium: up to $200 million in capacity for hull and liability, plus a separate $200 million for cargo. In parallel, US Treasury Secretary Scott Bessent spoke of a state insurance scheme for passages under military escort.
The most popular thesis — that the insurance market closed the strait — is described differently by each side. The Lloyd’s Market Association published a survey in spring: 88% of underwriters continued writing hull war-risk cover for the region, more than 90% for cargo, while the real obstacles were said to be dwindling supplies aboard vessels, uncertainty over salvage assets, a lack of ports of refuge, and stabilizers on chemical carriers. Marsh confirmed in July: capacity is sufficient, with $2.5–3 billion available worldwide for hull insurance; cover can generally be obtained — expensively and in a patchwork, because some underwriters have already suffered losses and raised prices, while others spent months without a single claim.
The counterargument is built on price: hull war-risk rose from prewar 0.05–0.2% to 1.5–3%, to 5% for vessels linked to the US, Britain, and Israel, and at the peak in late March reached 7.5–10%. Whatever policy is being sold, the strait has closed on its terms. This argument describes the mechanics more precisely than the outcome: for a cargo shipper, the difference between “there is no policy” and “there is a policy at a price that makes the voyage pointless” disappears completely, and both versions produce the same result on the water.
So who closes the strait? None of those named in the news bulletins. The public tally is kept in missiles and statements, while decisions are made in two places: in the reinsurer’s negotiating room, where a price is named in percentages, and in the owner’s office, where that price is compared with the cost of going around.
This structure also explains why negotiations over a “passage tariff,” still in Iran’s hands, affect the delivered cost of Gulf oil less than the insurance curve already has: passage has long been paid for, only the bill is sent not by Tehran but from London — around $3–10 million per tanker. The public dispute over the right to charge a toll runs above a private price list that has existed since spring.
The exact reason for the final collapse in traffic cannot be proven, and that should be stated plainly: both forces produce the same number. Masters’ risk assessments and the price of the policy converge on the same number: around 14 transits a day, against a hundred before the war. They could only be separated by an experiment no one will conduct.
And the final line of the bill is easiest to verify not from documents. In March, broker Smith said of Hormuz quotes: “Nobody is buying.” By mid-September, according to vessel-tracking data, around 14 ships a day were passing through the strait, against a hundred before the war. The strait is neither open nor closed — it simply costs that much.