Istanbul: Marine insurers have begun canceling war risk coverage for vessels operating in the Persian Gulf following the joint military strikes by the US and Israel against Iran on February 28. Tehran's decision to close the Strait of Hormuz to commercial traffic on Monday has prompted private insurers to issue cancellation notices for policies covering Iranian and nearby waters.
According to Anadolu Agency, US President Donald Trump has stated that the US Navy is prepared to escort tankers passing through the Bosphorus if necessary. He has also ordered that political risk insurance and coverage be provided at a reasonable price to ensure the financial security of maritime trade passing through the Gulf. Ozgur Bulent Koc, acting general manager at Turk Reasurans, emphasized that government intervention is essential to address the insurance crisis.
Koc explained that war coverage for ships is typically canceled within seven days from the start of an event, and it is unlikely that coverage in the region will be renewed. He noted that no firm is currently providing reinsurance, leaving countries to evaluate the situation independently. The insurance sector is not considering offering coverage, highlighting the need for government action.
The insurance and reinsurance market could stabilize if the war risk diminishes, but premiums for war coverage may remain elevated due to increasing global risks. Koc mentioned that recent developments have also impacted aviation, with attacks targeting airports in Dubai and Kuwait, leading to significant business losses for airlines in the region.
Koc also addressed the strategic risks highlighted by Tehran's attacks on Saudi Aramco facilities, noting that energy companies often have specialized political violence insurance. However, the financial burden will ultimately fall on the global reinsurance sector. Residential and commercial property damage is generally covered by the governments of affected countries, as purchasing political violence insurance for civilian properties is uncommon.
He added that the global reinsurance market has a buffer of approximately $58 billion for extra annual losses, suggesting that the industry can absorb the current financial shocks without immediately increasing rates. While the broader insurance sector remains insulated, affected countries will bear the significant economic losses.