Oil firms shop for separate war risk cover as premium on cargo transiting Strait of Hormuz spikes up

Indian entities importing crude oil, petroleum products, chemicals and fertilisers from the tension-ridden Arabian Gulf are paying “phenomenally higher” cargo insurance premium to cover war and strikes, after global marine underwriters imposed extra premium to insure cargo transiting through the Strait of Hormuz — the world’s busiest oil shipping lane — in the wake of tough measures taken by the US on Iran over its nuclear programme.

Typically, cargo insurance clauses exclude war and strikes, but by attaching the war and the strikes clause, they get restored. Before tensions built up in the region, full-fledged cargo cover was available at about 0.0006 per cent of the cargo value, as competition among global underwriters to grab “more market share and volumes” drove down premium costs substantially.