Hormuz shipping 'insurable' but 'operationally too risky', say experts

The leader of the UN's maritime agency has told CGTN that "it's too risky to operate" shipping in the Strait of Hormuz – while an insurance expert insists "it's insurable if you are prepared to take the risk."

Arsenio Dominguez, Secretary-General of the UN's International Maritime Organization (IMO), underlined in an exclusive interview that "I continue to call on ships not to sail in the region until it is safe to do so."

In retaliation for the attacks launched since February 28 by Israel and the US, Iran has warned that it will attack any maritime traffic in the Strait of Hormuz – a pinch point in the Gulf, as little as 40 kilometers wide, through which more than 20 percent of the world's oil and LNG is shipped. 

Since then, some tankers have been hit by explosives-laden boats, and the US has said it has "eliminated" 16 mine-laying vessels. Although some traffic has passed without attack, the uncertainty and threat has caused huge confusion and worry.

"We have around 20,000 seafarers that are being affected by this conflict in the region," Dominguez said. "We have around 3,000 ships also affected. So far, we have 16 ships confirmed who have been targeted, and eight seafarers have lost their lives."

Dominguez insisted the Strait remains open – "In accordance with the United Nations Convention of the Law of the Sea, straits around the world cannot be closed to navigation" – but acknowledges the reality of the situation: "Legally speaking, the Strait of Hormuz is open. Operationally, it's too risky to operate. That's the difference right now."

Insurance premiums 

A huge part of that difference is in the cost of insurance – and Marcus Baker, the Global Head of Marine, Cargo and Logistics at insurance broking and risk management consulting firm Marsh, acknowledged that premiums have shot up. 

"Before February 28, we were seeing rates of around 0.25 to 0.5% on the value of the ship," he told CGTN. "Now, if you want to go through the Strait of Hormuz, that's at least in the 3% territory."

Baker refuted stories that coverage had been canceled, insisting that insurers had renegotiated "as is their right under terms and conditions" and summarizing that "the short answer is it's insurable if you are prepared to take the risk."

For Dominguez, it's not just about money but people. 

"We cannot put a price on a human life," the IMO chief said. "So even with insurance, there's still the risk of the ships being affected."

As for the numbers affected, Baker warned it will only grow as the conflict grinds on.

"If this is short then I think we can see things return to a degree of normality over a matter of weeks," he said. "If this goes on for a long period of time, the supply chain issues are extreme. It's not just about getting 20% of the world's oil  – it's about delivering food and supplies to the UAE, Abu Dhabi, Bahrain and so on."

To end the conflict, Dominguez urged negotiation. 

"What we need now is to bring the parties together, to give multilateralism the place that it deserves," he said. "To actually understand that we may have differences, but there are ways to have dialog and find those solutions."