There are at least 2,000 ships and 20,000 crew members trapped on the waters of the Persian Gulf as one of the world’s largest shipping lanes remains clogged. Around 800 are stuck in the Strait of Hormuz.
If they want to get out, they’re going to need safe passage. But they’re also going to need insurance.
Ships can technically move without insurance — they just can’t go anywhere.
“They will not be accepted at any port,” said Rahul Kapoor, vice president and global head of shipping and metals with S&P Global Energy.
No port in its right mind would let a ship that doesn’t have liability insurance pull up. But ships also need to insure themselves.
“What’s called hull and machinery, so that covers damage to the vessel itself. These are the two core insurances which a ship needs,” Kapoor said.
Small issue: None of them apply in a war.
“And this is typical of insurance policies, right?” said Brandan Holmes, vice president-senior credit officer at Moody’s Ratings. “‘We cover a range of things except this,’ and war is excluded.”
So, ships have to get war insurance. But one more small issue: The war insurance gets canceled if there’s an actual war. Not immediately, but pretty darn fast.
“Seventy-two hours to seven days, but we’ve heard cases where it can be done in 24-48 hours,” Holmes said.
