Just coughing up higher premiums for traversing through conflict-hit areas might not be enough for shippers, who could be looking at no fresh cover and the prospects of cancellation of cover already given.
Last week, the Strait of Hormuz was ground zero for a global shockwave. After the US’ airstrikes on Iranian nuclear sites, Iran threatened to shut the world’s most critical oil corridor, while several Gulf countries had to briefly shut their airspace after Iran targeted US military base in Qatar.
While the ceasefire between Iran and Israel now appears to be holding up, it remains fragile as countries globally wait for further developments.
Fresh marine insurance covers will be hard to come by when there is an actual war happening or an uneasy peace, said Balasundaram R, secretary general at Insurance Brokers Association of India. With ceasefire announced, there may not be cancellation of war covers from existing policies as of now. “However, in case of a fresh policy, insurers will be wary”, he said, adding that in any case, with Iran under sanctions, cargo insurance coverage to or from Iran is restricted.
At the outset, container shipping lines have been assisting the trade by continuing with their services to the Persian Gulf, said Sunil Vaswani, executive director at Container Shipping Lines Association. With that said, since the area remains a conflict zone, although an inactive war zone, the insurance covers will naturally cost more.
However, were it to be an active war zone, the insurance companies could refuse to offer any cover for the hull or the cargo, which would then make it difficult for any trade to happen, he explained.
Hull insurance is a variant offered under marine insurance that offers insurance coverage for ships, vessels and their equipment and machinery.
So as of now, the insurance cover continues, although at a higher premium and, therefore, the ‘war risk surcharge’ is imposed by some of the shipping lines.
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