Main Station Reporter Observation | Tensions in the Middle East escalate, London insurance market takes the lead in sensing the global shipping temperature

Ask AI · Why can the Middle East situation rapidly drive up premiums in the London insurance market?

The war between the U.S. and Israel against Iran is still ongoing, and shipping through the Strait of Hormuz has been severely disrupted. In the global shipping system, insurance markets are often the most sensitive “thermometer” for risk. As one of the pricing centers for global maritime insurance, the London insurance market has, to a certain extent, also become an important window for observing global energy and supply chain security.

CCTV reporter Chen Lincong: The place I’m in right now is the City of London. This is one of the world’s insurance hubs, and also one of the most important trading markets for global shipping, energy, and war-risk insurance. Every day, insurance brokers and underwriters from all over the world come here to assess risk and negotiate pricing.

Once the situation in the Middle East tightens—especially when shipping risk in the Strait of Hormuz rises—premiums for vessels’ war-risk insurance often increase rapidly. And these insurance costs ultimately filter down, layer by layer, into shipping costs and energy transport, even affecting global trading costs. That’s why people in the industry often say this: when the Middle East situation becomes tense, London’s insurance market often feels the “temperature” first.

The Middle East conflict disrupts shipping operations for the relevant vessels

This year, before the U.S. and Israel launched military strikes against Iran, the prevailing quotes from maritime insurance brokers and the London market were about 0.2% to 0.3%. For example, for a container ship valued at $150 million, the war-risk insurance premium for a single passage through the Strait of Hormuz was roughly $375,000 to $450,000. After the U.S. and Israel launched military strikes against Iran, insurance costs for the relevant vessels were quickly raised, and shipping prices also surged significantly, disrupting the shipping operations of the affected vessels.

Neil Roberts, head of maritime and aviation business at the British Lloyd’s: Exactly how much vessel insurance premiums rise depends on the type of vessel and the specific circumstances, but media reports say the premiums are about between 1% and 3%. But the real situation can be different. You may have heard these figures, and in some cases, they are indeed true; however, insurance costs are only a small part of the operating costs of shipping. Shipping companies also need to consider freight rates. Freight rates have already risen by 11 to 12 times; in addition, there are also fuel costs and delay costs caused by vessel detours.

(CCTV reporter Chen Lincong)

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