War-risk insurance premiums for vessels operating on Gulf shipping routes have significantly increased due to rising geopolitical tensions in West Asia. According to a report by Equirus Raghnall Insurance Broking, premiums on high-risk routes have surged by 200-300% in recent months, and in some cases, by over 1,000%. This spike has seen premiums for the riskiest voyages jump from 0.2-0.5% to 3-5% of a vessel’s value, leading to a substantial rise in voyage costs.
The report highlights that these developments could potentially raise India’s crude oil import costs if disruptions in the region persist. While insurance is just one part of overall logistics expenses, continuous increases in war-risk pricing could significantly impact the landed cost of crude oil imports into India, especially for cargoes from or passing through West Asia.
Amit Goel, Director at Equirus Raghnall Insurance Broking, emphasized that the surge in war-risk premiums, coupled with increased hull and machinery exposure and security costs, will elevate the landed cost of crude imports into India. Even in the absence of a formal closure of key shipping lanes, insurers and reinsurers are likely to reassess risks, leading to higher premiums, stricter underwriting norms, and potentially reduced insurance capacity.
The report also warns that the effects may extend beyond Middle Eastern crude shipments, potentially affecting global marine insurance capacity. This could result in higher insurance costs for Russian crude shipments to India, particularly if tanker availability decreases or vessels are compelled to operate in higher-risk environments. The marine insurance market in India is estimated to be around Rs 5,500 crore-Rs 5,800 crore, with expectations of firm pricing in the near term due to geopolitical influences on war-risk premiums. However, a sustained easing of regional tensions could help alleviate pricing pressures over time.
