UAE Oil Company Says Cargo War Insurance Rises to 5% to 6% of Cargo Value
Executives from the UAE National Oil Company stated that after the outbreak of the Iran war, cargo war insurance has risen to 5% to 6% of the cargo value, indicating that the conflict has directly increased transportation and trade costs. This rate corresponds to the cargo value rather than just the ship's hull, meaning that the insurance premium for a shipment of crude oil or refined oil can escalate from negligible to millions of dollars.
The public quotes for hull war insurance in the London market are higher and more volatile. Before the war, the Gulf transit was about 0.25% of the ship price; after the U.S. and Israel struck Iran on February 28, the peak reached 5% to 10% of the ship price. For a tanker valued at $100 million, the war insurance for a single voyage can reach several million to $10 million. Brokers indicate that the quotes for U.S. and U.K. associated vessels are more expensive, with the policy validity period compressed from 24 to 48 hours to about 6 hours.
Cargo insurance and hull insurance are not synchronized. After the ceasefire, hull rates temporarily fell from about 5% to around 2%, while cargo war insurance remains sticky for oil and grains. DP World previously stated that during peak combat periods, oil exporters paid premiums as high as 10% of the cargo value. After the Joint War Committee designated the Persian Gulf, Hormuz, and Red Sea as high-risk areas, standard cargo terms do not automatically cover war risks, requiring separate purchase and acceptance of a seven-day cancellation notice.
The shipping sector is also raising prices. The cost of a supertanker voyage from the Middle East to China is reported to be around $20 million round trip; the chairman of TotalEnergies stated that the freight and insurance through Hormuz equates to about $10 per barrel. Some shipping lines are adding war surcharges. At the beginning of the conflict, the insurance association issued a notice terminating war insurance for waters near Iran, but the London market continues to renew at high prices.
Mechanically, this is a price discovery for war risk, not a disappearance of shipping capacity. The buyers are oil-producing countries and traders that must exit the bay, while the sellers are the underwriters of Lloyd's war insurance. Premiums are drawn from the cash of cargo owners and charterers, ultimately entering the onshore crude and container quotes. The beneficiaries are the syndicates still willing to underwrite; the pressured parties are long-term sellers who locked in prices before the war and shipowners who cannot sail without a policy. The funds have not left energy trade; they have merely been carved out of the cargo price to be handed over to the insurance ledger.
Source: Public Information
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The Gulf war insurance was originally a product adjusted by "named areas + additional premiums," with pre-war rates of 0.1% to 0.25% being a comfortable zone after years of calm. Once Hormuz is classified as a conflict zone, underwriters can void old policies using a 48-hour or 7-day cancellation right and reopen them based on the voyage. The UAE National Oil Company stating 5% to 6% of cargo value translates the risk table of insurance companies into a cost item for the national oil company.
The capital pathway is that rising premiums replace physical blockades. The channel does not need to be completely closed; as long as premiums are high enough to change the division between CFR and FOB: if the seller is responsible for transport insurance, profits are eaten up by premiums; if the buyer self-insures, the landed price immediately rises. The U.S. has previously pushed for hundreds of billions in reinsurance facilitation, but the market response has been tepid, indicating that the gap lies in price rather than the availability of policies. Iran has also promoted transit insurance priced in cryptocurrency, turning the same waterway into a geopolitical financial product.
In comparison to the Houthis attacking ships in the Red Sea and the grain corridor in the Black Sea: hull insurance jumps first, cargo insurance sticks later, and surcharges are written into freight rates. Energy shipping is at a "can pass but very expensive" plateau, not a complete halt. Pricing power has shifted from shipowners' freight tables to hourly quotes from war insurance underwriters.
The structural judgment indicates a transfer of pricing power. Whoever can provide the next voyage's war insurance decides whether that barrel of oil can leave the Gulf. The mechanism is: missiles change the probability of loss, insurance changes whether a transaction occurs; a 5% to 6% cargo value premium is equivalent to adding a tariff to each shipment, with the recipient changing to the syndicate.
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