Lloyd’s voids hull cover for ships paying Iran’s Hormuz toll

The global shipping industry is facing an insurance crisis across two of its most vital chokepoints simultaneously, as war-risk premiums for tankers transiting the Strait of Hormuz have surged to levels that threaten to choke off remaining oil trade from the Persian Gulf.

Premiums Hit Record Levels

Additional war-risk premiums for ships passing through the Strait of Hormuz have jumped to 7.5–10% of hull value, up from 1–3% just weeks earlier, according to Marcus Baker, global head of marine, cargo, and logistics at insurance brokerage Marsh ↗ 0.22%, in comments reported by S&P Global ↗ 1.01% on July 22. For a tanker valued at $100 million, that translates into a single-voyage premium of up to $10 million — a figure that was roughly $250,000 before the conflict began.thenationalnews+1

The pressure intensified on July 23 when the Lloyd's Market Association published a new model clause stating that any shipowner who pays Iran's Strait of Hormuz transit toll will lose hull coverage entirely. Under the clause, LMA5708, insurers are discharged from all obligations on a vessel if a toll payment — whether financial or in any other form — is made to enable transit through Iranian territorial waters. The LMA said this reflects the risk of breaching U.S., UK, or EU sanctions and counter-terrorism legislation.lmalloyds+3

Red Sea Becomes a Second Chokepoint

The same day, war-risk premiums for voyages through the southern Red Sea doubled to over 1% of hull value after Yemen's Houthi forces attacked at least one tanker, Reuters reported on July 23. Premiums had already risen from 0.3% to 0.75% earlier in the week after the Houthis declared a naval blockade on Saudi Arabia on July 20 and claimed missile and drone strikes on two Saudi oil tankers, the Encelia and the Layla, on July 22.marinelink+3

The dual squeeze on the Strait of Hormuz and the Bab el-Mandeb Strait — together accounting for roughly a third of global seaborne oil trade — has left shipowners with few viable alternatives. Shipbroker Arrow noted that outbound tanker transits through Hormuz had fallen to an average of four per day, down from eight during the earlier ceasefire period.grosswald

Insurance Availability in Question

The LMA's new clause effectively creates a binary choice for shipowners: pay Iran's toll and lose insurance, or refuse and risk Iranian retaliation. Iran confirmed in June that its toll system is operational, charging vessels between $1.5 million and $2 million per crossing, with payments accepted in cash, cryptocurrency, and barter.kurdistan24

Lloyd's had launched a consortium in June offering up to $200 million in hull and P&I capacity for Hormuz transits, but industry participants say the transit-fee clause now limits even that facility's practical usefulness. Arabella Ramage, LMA's legal and regulatory director, said the clause "aligns with existing sanctions and terrorism frameworks, while also evidencing the insurer's due diligence".lloyds+1