The current Strait of Hormuz crisis demonstrates that maritime insurance is not simply reacting to insecurity but actively governing access to the sea. War-risk premiums have increased from pre-crisis levels of approximately 0.02–0.05% of vessel value to as high as 0.3–1% per voyage, with extreme cases reportedly reaching several percentage points of hull value. For a $100 million tanker, this translates into costs approaching or exceeding $1 million per transit. In parallel, major insurers have issued cancellation notices for war-risk cover across the Arabian Gulf, rendering some voyages effectively uninsurable. The result is immediate behavioural change: vessel traffic through the Strait has collapsed by over 80%, with hundreds of ships idling or rerouting despite the absence of a universally enforced physical blockade. Maritime access in Hormuz is, of course, shaped by the interaction of multiple actors, including military infrastructure (not exclusive to military deployments), state security advisories, charterers, and energy market demand. However, insurance occupies a distinctive position within this constellation. Unlike other actors, it operates at the point of operational viability, where without cover, ships cannot legally or commercially sail. While international law does not mandate universal insurance for all vessels, a series of IMO conventions require ships to maintain “insurance or other financial security” for key liabilities, including pollution damage and wreck removal. In practice, this creates a system in which commercial navigation is contingent upon insurability, as vessels without valid certification cannot lawfully enter ports or engage in trade. In this context, it is not only states that are shaping access to the Strait, but insurance markets that are structuring which vessels can move, under what conditions, and at what cost. This article therefore argues that insurance functions as a key operational gatekeeper of maritime security: access is made conditional on the ability of shipowners to secure cover, comply with insurer-defined risk mitigation measures, and absorb escalating premiums. Movement is not prohibited outright, but selectively enabled, priced, and constrained through the mechanisms of insurability.
Understanding insurance as governance means recognising that policies are not neutral financial products. They are contracts written in a language that mandates behaviour: due diligence, seaworthiness, prudence. If a shipowner wishes to remain insurable, they must follow prescribed routes, adopt specified security measures, report to designated authorities and prove they have acted carefully. Insurers become regulators by other means, defining acceptable risk and penalising deviation through denial of cover or inflated premiums. Maritime governance is structured through three core insurance instruments: hull and machinery, cargo, and Protection and Indemnity (P&I). Together, these distribute risk across vessel, goods, and liability, creating a system in which financial exposure determines operational behaviour..P&I Clubs are particularly significant because their focus is explicit: "people, property, and the environment". Where hull underwriters care about steel and cargo underwriters care about commodities, P&I is where questions of seafarer safety, legal liability and operational ethics converge.
When risk escalates, two additional insurance products come into play: war‑risk cover and kidnap and ransom (K&R) policies. Standard hull and cargo policies exclude losses arising from war, terrorism, strikes and politically motivated seizure. War‑risk policies fill that gap, but they must be purchased separately and declared for each voyage into a designated high‑risk zone. K&R insurance, which became a distinct maritime product only after 2009 in response to Somali piracy, covers negotiators, ransom payments and related costs when crews are taken hostage. These products are expensive. At the peak of Somali piracy in 2011, shipping giant A.P. Møller–Mærsk spent $200 million on counter‑piracy measures, much of it driven by insurance requirements. Unlike the Somali piracy period, where firms absorbed rising costs, insurance markets in Hormuz are now directly constraining access to the sea by determining whether ships can sail at all.
The boundary between "ordinary marine risk" and "war risk" is policed by the Lloyd's Market Association Joint War Committee (JWC). Composed of elected underwriters representing the Lloyd's and company markets, the JWC maintains a "War List" of territories and waters considered subject to heightened political or conflict risk. The Committee does not conduct its own intelligence gathering; instead, it relies heavily on external security consultancies and considers the political and economic consequences of listing an area. This makes the JWC inherently reactive. It waits for incidents to accumulate, receives briefings from consultants, debates the commercial and diplomatic fallout, and then updates the list. Once an area is listed, the effects ripple across the industry. Owners must notify insurers before transiting and pay additional premiums for war‑risk and K&R cover. For some, the cost becomes prohibitive.
During Somali piracy, satellite tracking showed ships rerouting thousands of miles around the Cape of Good Hope to avoid the High Risk Area, because "the extra fuel was cheaper than paying the expensive K&R premiums". In narrow chokepoints like the Strait of Hormuz, however, rerouting is not an option. At present, and according to the IMO, approximately 20,000 seafarers are reportedly stranded in either the Arabian Gulf or the Gulf of Oman. Critically, the JWC does not issue operational guidance. It prices risk but leaves shipowners to determine how to manage it. This is where the International Group of P&I Clubs diverges sharply. Unlike the JWC, the P&I Clubs maintain direct communication networks with seafarers through their shipowner members. The International Group of P&I Clubs, which collectively covers approximately 90% of the world’s ocean-going tonnage, occupies a unique position within the maritime risk architecture. Unlike hull and cargo insurers, which primarily price physical and commercial assets, P&I Clubs are directly exposed to the human and environmental consequences of maritime insecurity, including crew injury or death, pollution, and third-party liability. This creates a structural tension at the heart of maritime governance: where other insurance typologies incentivise risk pricing, P&I internalises the costs of harm. This institutional position enables a more proactive approach to security. Through mechanisms such as the Maritime Security Sub-Committee, staffed by practitioners with backgrounds in seafaring, law, and naval operations, P&I Clubs draw on first-hand reports from vessels to identify emerging vulnerabilities before they crystallise into claims. The result is a continuous feedback loop between incident reporting and operational guidance, allowing insurers to shape behaviour in near real time.
In the Strait of Hormuz, this dynamic is becoming increasingly pronounced. While the threat profile has shifted from opportunistic piracy to state-linked missile and drone attacks, the underlying insurance mechanisms remain consistent. As the Joint War Committee extends war-risk listings and premiums escalate, P&I Clubs have intensified the issuance of loss-prevention guidance addressing new vulnerabilities, including blast protection, bridge hardening, and counter-drone awareness measures. Reports from seafarers indicate that practices originally developed in response to piracy are now being rapidly adapted to a more complex threat environment, often with limited preparation time. In effect, crews are positioned as the operational frontline of an insurance-driven security regime, designed and calibrated ashore but enacted at sea.
This raises fundamental questions about accountability. Who decides what level of danger is acceptable? When commercial pressures push ships into harm's way, who protects the crew? P&I Clubs, because they ultimately pay for crew casualties, have an institutional interest in prioritising safety. But their leverage is limited if charterers, cargo owners and freight markets demand passage regardless of risk. The result is a governance system that operates through incentives and conditions rather than outright prohibition, a form of soft power that structures choice without eliminating it.
This governance function becomes particularly visible in moments of acute crisis. In Circular 05/26 (March 2026), the UK P&I Club issued a 24-hour notice of cancellation for war-risk extensions covering transits through the Strait of Hormuz following escalation in regional hostilities. Once the notice expired, vessels were no longer automatically insured for passage and were required to seek prior approval from the Club, with premiums negotiated on a case-by-case basis. This represents a significant shift from risk pricing to access control.
This shift redistributes decision-making authority away from the vessel and towards insurance markets. Shipowners must demonstrate compliance with insurer-defined security expectations such as reporting protocols, routing measures, and defensive practices to secure cover. These requirements function as de facto regulatory conditions, structuring how risk is managed and how movement is conducted. However, this system exposes a clear accountability gap. While P&I Clubs internalise the costs of harm, they do not control the commercial pressures that drive transit. Recent data from UNCTAD shows that tanker freight rates have surged alongside war-risk premiums, with some routes experiencing increases of up to 200%, enabling shipowners to offset rising insurance costs and sustain operations despite heightened insecurity. Responsibility is therefore fragmented, with seafarers implementing security measures in environments shaped by actors operating ashore.
The Strait of Hormuz therefore reveals a critical transformation in maritime power. Control is no longer exercised solely through naval presence or state coercion, but through the quieter, more pervasive mechanisms of financial governance. Insurance markets do not need to close the Strait to control it; they render movement conditional, selective, and economically contingent. In doing so, they redefine what it means for a waterway to be “open.” The Strait remains functionally restricted, accessible only to those willing and able to absorb the costs imposed by risk pricing. This is not the disappearance of control, but its evolution. Maritime security is no longer governed at the point of force, but at the point of insurability.
