LNG Carriers Face $10 Million Insurance Bills for Hormuz Transits

The shipping industry for liquefied natural gas (LNG) has experienced significant changes in recent months. LNG carrier charter rates saw an unprecedented spike in early March, but have since returned to pre-crisis levels. However, war-risk insurance premiums have surged and show no signs of easing.

According to the Joint War Committee, which brings together underwriters from Lloyd's and the International Underwriting Association, Bahrain, Djibouti, Kuwait, Oman, and Qatar were added to its list of risk zones on March 3. This has led to a significant increase in insurance costs for LNG carriers transiting through the Strait of Hormuz.

For example, the marginal cost of a transit through the strait is now between $3-10 million per vessel, depending on the underwriter's quote. By comparison, Bab el-Mandeb was quoted at 0.5% of hull value as of July 22, versus 0.1% for vessels calling on the Saudi west coast without crossing the strait.