Reports issued in April indicate that insurance exposures in the Gulf region, now beyond the capacity of private markets, have reached approximately $352 billion. This has prompted international intervention, with governments stepping in as insurers of last resort and deploying more than $40 billion in additional capacity to prevent disruptions to global trade flows.
The mounting insurance burden is not confined to balance sheets. The strait handles around 20 percent of global oil supplies, equivalent to roughly 21 million barrels per day, as well as nearly 30 percent of the liquefied natural gas trade. At the peak of recent escalation, Brent crude prices surged above $120 per barrel, while marine insurance premiums spiked sharply, rising tenfold on some routes.
This surge has been compounded by a wave of cancellation notices issued by major global reinsurers to reduce their exposure to high-risk zones.
The impact has extended beyond the shipping industry to consumers worldwide. According to International Monetary Fund estimates released in April 2026, the combined shock from higher energy and shipping costs linked to Hormuz tensions has added about 0.5 percentage points to global inflation, while potentially lowering global GDP growth to 3.1 percent.
Ahram Online spoke to industry leaders about the dynamics of war risk insurance in the Strait of Hormuz, exploring how transit risks are managed and who ultimately bears the cost of rapidly rising premiums.
Unprecedented surge in premiums
Managing Director of Allianz Insurance Company for Egypt Ahmed Lotfy said the marine insurance market for cargo and ships is seeing an unprecedented rise in war risk premiums due to escalating tensions in key shipping routes, especially the Strait of Hormuz and the Red Sea coast of Yemen.
Lotfy noted that war risk rates in insurance and reinsurance markets have multiplied compared to peacetime levels, reflecting the scale of current risks.
He explained that Allianz Egypt adopts a case-by-case pricing mechanism based on global technical criteria, including voyage route and duration, vessel age, cargo type, and the carrier's reputation. These criteria are regularly updated in line with global market analysis and reinsurer assessments.
Business interruption and coverage limits
Regarding coverage for revenue losses resulting from precautionary vessel stoppages without physical damage, Lotfy said standard policies primarily focus on direct material losses.
However, he noted that Allianz Egypt provides integrated solutions, including project cargo insurance policies that may extend to cover losses arising from business interruption or delays, provided these result from physical damage to key project shipments.
This approach, he added, aims to support business continuity and enhance client resilience by combining technical expertise with advanced insurance solutions.
Reinsurance market reshaped
Lotfy also noted that tensions in the Strait of Hormuz have led to a notable reshaping of the global reinsurance market, with reinsurers tightening terms, raising premiums, and increasing deductibles.
He cited global estimates suggesting potential losses of around $1.75 billion.
Allianz Egypt, he said, relies on its strong relationships with leading global reinsurers, supported by its membership in the SanlamAllianz Alliance, enabling it to adapt to evolving market conditions while maintaining service quality and client protection.
Despite current pressures, Egypt’s insurance sector has continued to provide required coverage, Lotfy said, though under more conservative underwriting policies.
He added that geopolitical uncertainty has led to higher prices and stricter coverage conditions globally.
Marine insurance pricing dynamics
Alaa El-Zoheiry, chairman of the Insurance Federation of Egypt and managing director of GIG Egypt, said war risk premiums on marine cargo have increased by between 30 percent and 50 percent.
Despite these increases, he noted that rates remain within the per-mille range. Insurance costs per $1,000 of cargo have risen from around $0.50 before the tensions to approximately $1 or slightly less at present.
Hull insurance, however, has seen more pronounced increases, reaching between five percent and six percent of a vessel’s total value at the height of the escalation, before easing to around three percent during periods of ceasefire.
El-Zoheiry stressed that traditional hull war risk policies do not cover voluntary decisions to avoid sailing due to fear.
Coverage applies only in clearly defined cases, including physical damage resulting from collisions, missiles, or mines, as well as detention, confiscation, or official closure of shipping routes.
He noted that stoppages driven by commercial risk assessments or crew refusal to transit are typically excluded unless accompanied by tangible physical damage.
Shift to voyage-based pricing
El-Zoheiry told Ahram Online that the market has shifted towards voyage-based pricing instead of annual contracts, with insurers requiring detailed information such as exact routes, cargo type, and charterer identity.
He also reassured the shipping and trade sectors that sufficient capacity remains available through war risk pools and global reinsurers.
He pointed to international initiatives aimed at boosting capacity, including a $20 billion facility provided by a US insurer and an additional $20 billion from a consortium of five major US insurance companies.
No viable alternatives
Ehab Khadr, a strategic management expert and insurance broker, said the Strait of Hormuz remains an indispensable corridor for global oil transport, with no viable alternative capable of replacing its strategic and economic role.
He noted that proposed alternatives, such as pipeline expansions or reliance on the Egypt-Saudi SUMED pipeline, lack concrete implementation, leaving global energy trade heavily dependent on the strait.
Rising costs and market pressure
Khadr said war risk premiums have surged significantly, rising by as much as 130 percent and tripling in some cases amid military escalation.
Combined with oil prices approaching $99 per barrel, these increases are placing substantial pressure on both shipping and insurance costs.
Khadr said the burden of rising insurance and shipping costs is ultimately transferred to end consumers.
Higher costs for insuring oil tankers and goods shipments translate directly into increased energy and commodity prices, fuelling inflation at both global and domestic levels.
A new operational reality
Nasser Abdel-Raouf, head of the Nile Centre for Insurance and Commercial Arbitration, said the situation in the Strait of Hormuz has effectively become a state of war from a marine insurance perspective.
He noted that the shift to open military confrontation involving advanced weaponry has prompted protection and indemnity clubs to tighten their positions and withdraw some coverages from conflict zones.
Abdel-Raouf said global reinsurers are reducing their exposure or withdrawing from high-risk areas, while raising premiums to record levels, sometimes exceeding seven times normal rates.
Underwriting conditions have become highly conservative, with stricter scrutiny of vessel flags, counterparties, and routes, and the exclusion of interests linked to parties directly involved in the conflict.
Pressure on Egyptian insurers
He added that Egyptian insurers are facing dual pressure from rising reinsurance costs and declining demand due to higher premiums.
This has prompted the Insurance Federation of Egypt to diversify reinsurance sources and rely more heavily on mechanisms such as the Arab War Risks Insurance Pool to maintain balanced coverage amid escalating risks.
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