Although the US-Iran peace memorandum of understanding and the reopening of the Strait of Hormuz present a positive signal, the market is unlikely to view this as a definitive turning point at this stage, said Willis Head of Marine, Asia Lewis Hart.
Commenting on this newest development in the conflict to Asia Insurance Review, he said: “Underwriters will want to see a sustained period of stability rather than a short-term de-escalation. Over the past 24 hours, some marine insurers have begun to move away from high single-digit percentage rates. In some cases, headline rates appear to have reduced by up to 40%, alongside the continued application of volume discounts (for owners with frequent transits) and no-claims incentives.”
He also noted that there remains significant variation across markets, as well as between hull and cargo lines. “Underwriters are still far from signalling any return to pre-war war risk pricing.”
A more measured market outlook
In fact, according to Mr Hart, ongoing discussions among G7 leaders “may support a more measured market outlook”.
“We have seen past commitments on the reopening of the Strait of Hormuz and the actual reopening will ultimately depend on operational readiness, specifically mine clearance, maritime security and coordinated implementation,” he said.
“Uncertainty still remains on this process and the possibility of renewed hostilities.”
But as these measures are put in place and trade flows stabilise, Mr Hart said the market may “then expect to see further meaningful reductions in rates”.
“Regional additional premiums are unlikely to disappear in the near term, but with sustained stability, a return to pre-war pricing levels within the next 12 months is a realistic expectation,” he said.
“In the meantime, shipowners are actively preparing to resume transits through Hormuz. While insurance pricing remains a key consideration, most are waiting for formal agreements to be finalised and for initial operations to demonstrate that conditions are safe for both crews and assets.”