Geopolitics · GEOPOLITICS

The insurance market has collapsed under war—for the first time

The premium curve for Hormuz has ripped open a gap unseen in 50 years; for the first time, the U.S. government has stepped in directly as insurer

Approx. 2,350 words · Read time: ~8 minutes

London time April 20, late at night, a Greek shipowner’s office phone did not stop ringing. On-screen was a quote just sent by a broker—the same route, a VLCC sailing empty from Fujairah back into the Persian Gulf to load oil. Last Wednesday’s additional war risk premium (AWRP) was still USD 120,000per transit; the figure in the email was USD 1.8 million。

This is not a decimal-point error. Below the quote appeared a line:This price is valid for four hours only; renegotiation begins when London markets open Monday。

The shipowner on the other end didn’t rush to sign. He pulled up yesterday’s news: U.S. naval vessels intercepted an Iranian-flagged tanker in the Gulf of Oman; Tehran labeled the move “armed piracy” and vowed retaliation. One day earlier, Iran had declared the Strait of Hormuz “open to civilian vessels”—Brent fell more than 10%, and brokers exhaled halfway. Then came April 22, when Iran seized a vessel.April 23, Brent closed at USD 105.07, up 3%on the day. A two-week ceasefire agreement is nearing expiration.

In the end, the shipowner declined the USD 1.8 million quote. He posted one sentence in his internal group chat—

CHAPTER 01

The premium curve: From USD 120,000 to USD 1.8 million

For the past four decades, the Persian Gulf has been the insurance industry’s textbook case of “high-risk but priceable”—the Iran-Iraq War in the 1980s, Houthi disruptions in the 2000s, and the tanker attacks of 2019, each time resetting market equilibrium within weeks. The Lloyd’s Joint War Committee (JWC)—known in the industry simply as the JWC—updates its Listed Areas (high-risk waters list) within days or weeks after each conflict; premiums jump from 0.05% to 0.25% to 0.5%, but policies have never truly “shut down.” The private market held firm: if the premium was high enough, someone would always step up to underwrite.

This round shattered that four-decade confidence.

Figure 1 Hormuz war-risk AWRP quotes across three nodes · Source: Lloyd’s List / NorthStandard

February 28, following the U.S.-Israeli military operation codenamed “Epic Fury” , commercial shipping through Hormuz collapsed within a week. 70-90%。March 3 , the JWC issued Notice JWLA-033, addingBahrain, Kuwait, Oman, Qatar, and Djibouticollectively to its Listed Areas—a five-nation simultaneous listing has no precedent in JWC history。

March 1, NorthStandard and the London P&I Club—the two largest liability reinsurers in the global shipowners’ mutual market—each issued a 72-hourcancellation notice (effective March 5, 00:00 GMT ), removing the Persian Gulf and Iranian waters entirely from their war-risk coverage scope.This move wasn’t a price hike—it was an exit.

Lloyd’s List later summed it up with clinical precision—

“Gulf war risk premiums topping double-digit millions of dollars per trip.”

— Lloyd's List · 2026-03 Gulf Coverage Report

Single-vessel, single-transit premiums breached the double-digit million-dollar range;2-5% is the mainstream hull-insurance valuation bracket, with extreme transits reaching 7.5%A typical VLCC hull value stands at roughly USD 134 million; 5% of that is USD 6.7 million, plus cargo valued at around USD 200 millionper voyage.

Figure 2 Four vessel seizures/interceptions in Q1 2026, side-by-side · Source: Reuters / IMO Maritime Security

March 6, President Trump signed an executive order directing the U.S. International Development Finance Corporation (DFC) to provide sovereign-level reinsurance backstop for Persian Gulf shipping—initially a rolling facility of USD 20 billion , with Chubb as lead underwriter covering hull, cargo, and war risk. One week later, on March 13, the facility expanded to USD 40 billion, with six U.S.-based insurers joining: Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr, and CNA.

The DFC is not a secondary-market reinsurer; it is a U.S. government development finance institution originally tasked with guaranteeing sovereign projects in emerging markets.This marks the first time since its 1971 predecessor, OPIC, was founded that the DFC has placed its balance sheet directly behind tail-end risks in commercial maritime insurance.

Figure 3 Hormuz crisis timeline, March 1–April 23 · Red = escalation / Orange = market exit / Blue = sovereign intervention

This is the first repricing in nearly half a century of the insurance-military-sovereign triangle: sovereign credit has, for the first time, directly assumed the tail-end risk that commercial insurance markets refused to bear.

Contrasting this with 1987’s Operation Earnest Willclarifies the coordinates. That year, during the Iran-Iraq War, Iran attacked Kuwaiti tankers; Washington’s response was to reflag 11Kuwaiti vessels under the U.S. flag and deploy naval escorts. The 14-month operation (U.S. Navy estimated direct costs at several hundred million dollars) was the Cold War-era playbook: military force directly resolving commercial transport risk, where the flag served as the14 months—the flag was the insurance policy, and escort ships were the underwriter.

The 2026 script has changed. This time, the U.S. did not reflag vessels or organize escort fleets—it reinsured insurers. Same strait, same Iranian adversary, same objective—but a new toolkit.

Figure 4 DFC sovereign reinsurance mechanism vs. 1987 Operation Earnest Will · Military backstop → Financial backstop

CHAPTER 02

Asset implications: Repricing Chubb, shipping, and oil prices

Capital markets quickly grasped the implication.Chubb closed at USD 329.99on April 20, with record Q1 adjusted EPS of USD 6.82, “substantial growth” in core underwriting profit, and EPS excluding catastrophe losses up +13.5%year-on-year; total revenue stood at USD 15.3 billionyear-on-year ( +11.9%including ~USD 14 billion in net premiums); JPMorgan raised its target price to USD 340。

More telling was the entry of Berkshire Hathaway —National Indemnity, its subsidiary, is among the world’s most aggressive reinsurers of tail-end catastrophe risk;Warren Buffett personally approved participation in the DFC consortium, signaling to markets that the math here is clear: DFC bears the deepest tail risk, while commercial reinsurers capture only the middle segment—and thecombined ratiois artificially suppressed by government backstop.

For investors holding such stocks,the logic is no longer the traditional “property-casualty underwriting cycle”—it is now a “one-time repricing of sovereign reinsurance exposure”. That’s why Goldman Sachs, in an early-April client memo, categorized Chubb and AIG under the theme of “sovereign-linked reinsurance” , assigning them a relative overweight。

The same logic applies even more directly to the shipping sector.Frontline and DHT Holdings are up over 60%year-to-date; BofA Securities raised Scorpio Tankers’ target price from USD 61to USD 70in April, citing higher VLCC daily hire rates on the Cape of Good Hope detour route due to Hormuz disruption—and a consequent passive tightening of the global fleet’s “effective supply.” But BofA maintained its Underperform rating even while raising the target price, reflecting improved fundamentals—not a bullish valuation call.

COSCO Shipping Energy (China COSCO Shipping Energy, HKEX: 1138.HK), as China is both the largest buyer of Hormuz flows and the party most directly exposed to rising premium costs, has seen its share price oscillate over the past two weeks— 37.7% Chinese tanker operators simultaneously benefit from higher freight rates and bear the cost of higher premiums, with net impact depending on whether they act as carrier or cargo owner. For China—which imported1.4 million barrels per day of Iranian crude in H1 2026, representingof its seaborne crude imports—this narrative offers only bounded support for Hong Kong-listed tanker stocks. 13.5% of its seaborne crude imports—this narrative offers only bounded support for Hong Kong-listed tanker stocks.

Energy-sector dynamics warrant closer attention.Goldman Sachsmaintains its 2026 Brent baseline at USD 83, but adds a scenario:if the Strait closes for another month, the annual average will rise above USD 100; if ceasefire talks collapse and Middle East production losses persist at 2 million barrels per day, Q4 average could reach USD 115. This is a recommendation to keep all 2026 scenarios open.

Mislav Matejka of J.P. Morgan Asset Management said something widely quoted at the time— Mislav Matejka —“this too shall pass”, suggesting geopolitical pullbacks should be viewed as buying opportunities.

BlackRock Investment Institute’s Jean Boivin took a more restrained stance: he publicly listed two signposts(prerequisites for repositioning): first, concrete action toward reopening the Strait; second, macroeconomic transmission of the conflict being proven “controllable”—BlackRock will not increase risk exposure unless both conditions are met。

The positions of these three institutions can be laid out on the same table: J.P. Morgan acts on convergence trades, BlackRock manages structural risk, and Goldman Sachs sells scenario-based pricing. For allocators, the logic is straightforward: geopolitical premium is no longer transient—it is being rewritten into the 2026 valuation curve.

CHAPTER 03

Repricing: The start of a playbook

This repricing of the insurance-military-sovereign triangle will extend far beyond the Hormuz crisis itself. Over the past decade, critical supply chains (semiconductors, rare earths, vaccines, batteries) have all seen “market + sovereign” backstop models: the Biden administration’s CHIPS Act functions as fiscal reinsurance for semiconductor capacity; the U.S. Strategic Petroleum Reserve (SPR) release in 2022 served as sovereign reinsurance for energy prices.

What’s new about Hormuz is this—insurance—the purest commercial pricing market—has, for the first time, directly integrated sovereign credit at the front line of war. Next to watch: “wartime insurance” forsubsea cables, transatlantic data corridors, and even GPU logistics—these will be the same playbook replicated across other critical infrastructure.

In the past, “controllable” meant VIX below 20, oil below USD 90, and stable credit spreads; going forward, “controllable” may mean sovereign willingness to absorb the risk segment commercial markets cannot price.

Boivin of BlackRock may have delivered the most grounded judgment of this crisis—“controllable” itself is being redefined. That USD 1.8 millionquote, in fact, draws that new boundary.

Disclaimer

This article is based on publicly available information. Premiums, stock prices, target prices, and other data cited herein are sourced from Lloyd's List, Reuters, CNBC, Bloomberg, the official press release of the U.S. International Development Finance Corporation (DFC), and public disclosures by insurance firms. This article does not constitute investment advice and does not represent the position of any institution. Readers should assess their own risk tolerance and consult a licensed advisor before making decisions based on this content.

Sources

Lloyd's List · Lloyd's Joint War Committee JWLA-033 · NorthStandard P&I Circular · London P&I Club Notice · U.S. International Development Finance Corporation (DFC) Press Release · Chubb Q1 2026 Earnings · JPMorgan Equity Research · BofA Securities Tanker Note · Goldman Sachs Commodity Research · BlackRock Investment Institute · JPMAM Global Equity Strategy · Reuters · CNBC · Bloomberg

Data as of London close on 2026-04-23.