- Six oil tankers and a U.S. spy drone have been attacked since May either in, or near, the Strait of Hormuz — a strategically important waterway which separates Iran, Oman and the United Arab Emirates.
- Insurance to transit the Strait of Hormuz has actually increased 10-fold in the last two months as a consequence of the attacks.
- Every ship needs various forms of insurance, including annual war-risk cover as well as an additional ‘breach’ premium when entering high-risk areas.
- The Nikkei Asia Review report said insurers began imposing an additional charge of 0.025% of ship value on tankers transiting through the Strait of Hormuz.
A CNBC news article reports how the insurance rates of the world’s most important oil choke point are soaring in recent weeks.
Six oil tankers and a U.S. spy drone have been attacked since May either in, or near, the Strait of Hormuz — a strategically important waterway which separates Iran, Oman and the United Arab Emirates.
Anthony Gurnee, CEO of Ardmore Shipping, said that the threats are a part of the global shipping industry and are considering seriously.
Ardmore Shipping is a U.S.-listed company based in Ireland, with a business of owning and operating a fleet of tankers that move refined oil products.
Gurnee said that the insurance to transit the Strait of Hormuz has actually increased 10-fold in the last two months as a consequence of the attacks. The attacks brought the U.S. and Iran close to conflict last month.
President Donald Trump called off air strikes at the last minute in retaliation for Iran shooting down a U.S. drone over the Gulf, which followed attacks on two oil product tankers in the nearby Gulf of Oman by unidentified assailants.
While Washington blamed Iran for the attacks on four oil tankers in the same area on May 12, Tehran has denied the allegations.
“Whoever is doing this has demonstrated that they have the ability to be very destructive,” Gurnee said.
Insurance premiums based on the vessel value
Every ship needs various forms of insurance, including annual war-risk cover as well as an additional ‘breach’ premium when entering high-risk areas.
These separate premiums are calculated according to the value of the ship, or hull, for a seven-day period, Reuters reported.
The Nikkei Asia Review report
Last month, a Nikkei Asian Review report citing Japanese industry sources said additional insurance for tankers sailing through the Strait of Hormuz now cost 10 times what it did before two ships were attacked earlier in June.
The Nikkei Asia Review report said insurers began imposing an additional charge of 0.025% of ship value on tankers transiting through the Strait of Hormuz after four tankers were attacked off the coast of the United Arab Emirates in late May.
This extra charge has since jumped up to 0.25% since the June 13 attacks, the report added.
The Strait of Hormuz – linker of Middle East with the World
The Strait of Hormuz is located between the Persian Gulf and the Gulf of Oman. It is seen as one of the most important waterways in the world, linking crude producers in the Middle East with key markets in the rest of the world.
It plays a pivotal role for Asian economies that are heavily dependent on oil imports from the Middle East.
Flows through the narrow channel in 2018 made up about one-third of total global seaborne traded oil. More than one-quarter of global liquefied natural gas trade (LNG) also transited the Strait of Hormuz last year.
Daily oil flow in the Strait of Hormuz averaged 21 million barrels per day in 2018, according to the U.S. Energy Information Administration (EIA). That’s the equivalent of about 21% of global petroleum liquids consumption.
Denial of protection to Vessels at the Strait of Hormuz
Last month, Trump suggested the U.S. could stop providing protection to other ships in the Strait of Hormuz.
The prospect of the U.S. lessening its role in the strategically important waterway indicated a weakening of a nearly 40-year-old U.S. policy to defend national interests in the Persian Gulf.
In response to Trump, Japan’s chief cabinet secretary, Yoshihide Suga, reportedly said late last month that the safety of shipping in the Strait of Hormuz was “a matter of life and death for our country in terms of energy security.”
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