As the war on Iran enters its second week and the movement of oil tankers in the Strait of Hormuz experiences a slowdown, the economic toll of the war is rising.
“In maritime logistics, straits are not always closed by missiles or mines. Sometimes they are blocked by the rising risk of premiums on insurance,” said Emad Al-Saai, a risk management adviser at the United Nations Office for Disaster Risk Reduction.
In this sense, navigational closure is not necessarily the result of military operations, he added, noting that a shutdown may occur due to quieter yet equally damaging mechanisms such as finance, insurance, and sanctions.
Closure, in practical terms, means that vessels become unable to navigate a particular maritime route, whether because of direct military risks or because financial and political calculations render the journey economically unviable, Al-Saai said.
When war-risk insurance premiums surge or coverage is withdrawn, shipping companies halt operations automatically. Without financing for cargoes, protection and indemnity (P&I) coverage, and shipping companies being willing to assume the risk, maritime movement becomes effectively paralysed, he added.
The paradox is that a route may remain geographically open while being functionally closed within the global trading system.
Navigation does not stop completely, however, as while regular commercial ships pull back, a “shadow fleet” may continue to operate without Western insurance.
A shadow fleet is a group of commercial vessels, often oil tankers, that operate at the margins of maritime rules to hide their cargo’s origin, ownership, and destination in order to circumvent sanctions.
From this dilemma the idea of the Suez Canal setting up an insurance company has emerged, said Mohamed Ali, founding dean of the Faculty of Transport and Logistics and former adviser to the minister of transport.
Ali said that he had previously submitted recommendations to the Suez Canal Authority proposing the establishment of a maritime insurance company covering vessels operating on global shipping routes.
A plan to create a maritime insurer could offer an alternative to Western coverage, narrowing the space in which shadow fleets operate. In simpler words, a Suez Canal-backed insurance company could reduce the economic incentive for clandestine shipping by providing sanction‑safe coverage with lower risk premiums.
If Egypt created its own insurance company for the Suez Canal, it would likely play by a different set of rules to the big Western firms, probably being more relaxed about international trade bans and allowing it to insure ships that Western companies consider risky.
Such a strategic initiative, Ali stated, would offer preferential insurance rates for vessels transiting through the Arab region, while providing services across all international shipping lanes as part of a broader insurance and reinsurance framework designed to distribute risk.
This would be similar to other international agencies operating in maritime insurance, Ali said.
The company, he added, would function as a strategic arm of the Suez Canal Authority within global trade and have a voice within international insurance networks.
Establishing the company would also be part of the changes the maritime industry has been witnessing, according to Al-Saai.
The global maritime insurance landscape is undergoing a seismic shift as Eastern powers challenge Western dominance. For decades, Lloyd’s of London and the International Group of P&I Clubs have “formed a powerful alliance that regulates the flow of global trade,” according to Al-Saai.
By raising premiums to “prohibitive levels” in high-risk zones, this Western system can effectively force major shipping companies to abandon hazardous routes.
In response, “parallel maritime insurance groupings” have emerged in Russia, China, and India to bypass these financial barriers. Unlike Western firms, these Eastern frameworks operate under “sovereign directives” intended to ensure that trade continues regardless of risk or international sanctions.
This alternative system is also more than just a business move, as it represents a sovereign economic strategy designed to protect national lifelines and maintain the continuity of trade flows amidst growing geopolitical conflict.
Amr Al-Samadoni, a member of the Chamber of Transport and Logistics in Cairo, is not in favour of establishing a global maritime insurance company in Egypt, arguing that it would be highly complicated to do so given that existing insurance companies exert considerable influence and impose their conditions across global maritime transport systems.
The market, he noted, is extremely sensitive and reacts to news in a manner similar to that of the financial markets. This differs from the shipping sector itself, where freight rates tend to respond not to speculation but to tangible developments on the ground.
During the Houthi crisis in Yemen, for example, shipping rates did not rise until attacks on vessels in the Bab Al-Mandab Strait had actually begun, whereas insurance costs increased as soon as discussions emerged regarding the possibility of ships being targeted in the area, Al-Samadoni said.
He cautioned against attempts to compete by offering preferential or discounted rates in the insurance market for large vessels, given the potentially significant financial losses that such strategies could entail.
It would be better to establish an Egyptian shipping line before creating a new insurance entity whose primary role would be to provide insurance for vessels on the national shipping route, before expanding to provide coverage for ships operating on other maritime routes.
Islam Abdel-Bari, a professor of economics, suggested establishing an Egyptian maritime insurance agency under the umbrella of the Suez Canal Authority. The authority has already initiated steps in this direction by submitting a request to do so during a meeting of the International Union of Marine Insurance.
The move would be important for managing risk in the event of prolonged instability in the region, Abdel-Bari noted.
* A version of this article appears in print in the 12 March, 2026 edition of Al-Ahram Weekly
Short link: