Emergency Support Measures for the Maritime Industry Amid Middle East Crisis, Focusing on Premium Reductions and Liquidity Enhancement

The Financial Committee will add new shipping-industry categories directly hit by the Middle East war to the list of supported industries, and will begin work on financial support measures aimed at reducing shipping companies’ insurance premium burdens and preventing a tightening of funds.

According to three reports from financial authorities and figures in the financial sector, the Financial Committee plans to classify the shipping industry as the fourth Middle East-related disruption industry, following oil and chemical, construction, and steel industries. It intends to hold, at the earliest, the fourth industry–finance roundtable—hosted by Financial Committee Chair Lee Eui-won—in mid-May to discuss specific countermeasures. The core of this support is broadly divided into two areas. First, reducing the insurance costs required for voyages on Middle East routes; second, providing liquidity support to shipping companies shaken by soaring costs.

The issue facing the shipping industry most urgently is insurance. As Middle East risk increases, it has become increasingly difficult for vessels to obtain voyage insurance for trips through the Strait of Hormuz; even when they can obtain it, premiums have already surged. The situation is similar for rerouted routes. Because there are insufficient voyage statistics and accident data for that route, insurers will not actively launch products; even if some products are available, their pricing is extremely high. It is understood that marine insurance was originally underwritten jointly by multiple insurance companies, with risks shared through structures involving reinsurance and retrocession with reinsurance companies. It is reported that the Financial Committee is considering adjusting the fee burden borne by domestic private reinsurance companies in that process, such as Korean reinsurance companies, so as to ultimately reduce the insurance premiums that shipping companies need to pay.

With this incident as an opportunity, the likelihood of formally discussing a national reinsurance system has also increased. National reinsurance refers to a mechanism in which, when war or large-scale disputes create risks that the private insurance market alone cannot handle, the government uses fiscal funds to assume part of the risk. Financial Committee Vice Chair Kwon Dae-young previously proposed at the State Council meeting on April 21 that, in order to respond to national crisis situations such as the isolation of the Strait of Hormuz, a system that would allow the nation to provide reinsurance should be established. This can be seen as reflecting an awareness of the problem: relying solely on private insurance may lead to excessive premium hikes or even obstruct product supply itself, so the government should act as a “last safety valve.”

The necessity of liquidity support is also growing. The shipping industry has a high proportion of dollar-denominated sales; while higher freight rates and high exchange rates may bring some favorable effects for earnings, many assessments believe that, in actual on-site conditions, the pace of cost increases is even faster. This is because the insurance premium add-ons, rising dangerous-conditions allowances for crew members, and higher marine fuel oil prices caused by soaring oil prices stack together, causing a sharp increase in cash burdens. In addition, due to rising freight rates, some cargo owners even give up loading cargo, and business conditions have worsened. According to assessments by Korean companies, the average daily passage through the Strait of Hormuz in January and February this year was 125 vessels, but last month it fell to fewer than 10. A senior researcher, Lee Rui-jin, analyzed that among the few vessels currently transiting the strait, most are small ships, and major large vessel types’ voyages are effectively restricted throughout the war. Therefore, it is highly likely that, centered on lead creditor banks such as industrial banks, discussions will explore various financial support measures, including deferring repayment of existing loans. Previously, the Ministry of Oceans and Fisheries also, at the end of last month, rolled out separate supporting measures through the Korea Ocean Development Corporation, including rapid provision of emergency business-stability funds and unsecured credit guarantees.

Ultimately, this set of measures means starting to treat the shipping industry not as merely a single sector needing support, but as a defensive layer for basic industries that support import–export logistics and energy transportation. Given that the Middle East situation is unlikely to stabilize in the short term, government support may expand from one-time expense compensation toward measures that supplement the insurance market and build a public safety net during crises. This trend could trigger subsequent institutional discussions on how much risk the state should bear when future wars and geopolitical shocks recur—especially risks that private finance alone is unable to shoulder.