Shipping and maritime insurers have already started charging war risk premiums in the waters around the Middle East bunkering hub of Fujairah after the insurance coverage area was expanded to include the Persian Gulf and the Gulf of Oman, according to industry executives.
Following attacks on four oil tankers near Fujairah on May 12, the Joint War Committee of insurance body Lloyd’s Market Association on May 17 issued a circular adding the Persian Gulf and adjacent waters including parts of Gulf of Oman to the list of areas under risk of “Hull War, Piracy, Terrorism and related perils.”
The JWC said the premium will vary and is not automatically added for the insurance cover.
Given the circumstances in the Persian Gulf, it would be expected that underwriters are reviewing voyages on a case-by-case basis and acting according to the risk presented, Neil Roberts, secretary for JWC in the Lloyd’s Market Association, told S&P Global Platts.
This may involve changing the terms and conditions of the policy, which can also include charging an additional premium, Roberts said.
However, he said this premium does not get automatically added.
War policies have a seven-day cancellation notice and so the new area is already effective a week after the individual underwriters would have given notice to their clients, he said.
Since the JWC circular was issued on May 17, the new notification will have started from May 24, Roberts said.
Shipping industry sources said it is the prerogative of the insurers to charge such a premium from the owners, who can then strive to pass it on to the charterers if the market situation so warrants.
They confirmed that some of the underwriters are already charging the war risk premium.
A dry bulk Supramax owner whose ships pass the Gulf of Oman told Platts that “our underwriters are already charging [war risk] premium” from us.
On Friday, the Petroleum Association of Japan’s president Takashi Tsukioka said that Japanese refiners had not seen an increase in insurance rates as yet.
“We have seen little impact so far [on insurance rates], but this is the beginning of such moves,” he said (see story 0907 GMT).
Japan relies heavily on crude imports from the Middle East — most of which transit through the Strait of Hormuz. Middle Eastern supplies accounted for 89% of Japan’s crude imports of 3.15 million b/d in January-April, according to government data.
The expansion of the war risk area comes after Saudi Arabia said two of its oil tankers were victims of a “sabotage attack” off the coast of Fujairah on May 12, while two other vessels — identified by market sources as UAE-flagged and Norwegian-flagged — were also attacked.
Fujairah is one of the world’s biggest bunkering hubs and lies just outside of the Strait of Hormuz, a critical chokepoint through which 30% of the world’s seaborne oil transits, giving it a strategic location for oil trading.