Howden Re, the reinsurance arm of Howden brokerage, has released an analysis of the situation in the Strait of Hormuz, noting that while global reinsurance capacity remains solid, conditions are tightening in the maritime, energy and political violence sectors as geopolitical instability continues in the region.
The company noted that these developments are affecting underwriting behavior, pricing levels and risk appetite across exposure areas.
in its report Strait of Hormuz update: Impact of changing risk landscape on markets, Howden Re explains that ongoing chaos in the region has put pressure on hull wars, cargo wars, offshore energy and political violence.
While the wider reinsurance market remains well-supplied, Howden Re highlighted that conditions were deteriorating in specialty categories related to marine and energy risks. Ship traffic through the strait has dropped sharply, Brent crude prices have risen above $100 a barrel, and insurance companies have expanded high-risk areas while increasing war risk pricing.
Howden Re estimates that global oil trade flows have fallen by more than 60% since the escalation, with route changes and security requirements continuing to disrupt logistics and increase operating costs. The report describes the current situation as “extreme” pressure on the business as a result of ship accidents, attacks on energy infrastructure, rising premiums and growing uncertainty about the outcome of claims, resulting in hull wars, maritime cargo wars and political violence.
The reinsurance broker also noted that recent large losses, including the Baltimore Bridge incident, have heightened concerns about accumulation of marine and infrastructure risks and complex liability risks.
Richard Miller, managing director of ocean, energy and political violence at Howden Re, commented: “The Strait of Hormuz remains one of the world’s most strategic maritime chokepoints. Its location means disruptions can quickly create rerouting pressures, time lags and compression of supply chain resilience. The market reaction reflects a reassessment of the cumulative geopolitical risks of the combined ocean, energy and political violence combination.”
He added: “War risk pricing has reacted sharply, but more importantly has been the continued volatility, uncertainty over the progress of claims and the pressure this has placed on specialist insurers already managing recent large losses, including the loss of the Baltimore Bridge.”
Howden Re also noted that recent events have increasingly focused on the development of aggregate risks and long-tail claims, particularly in marine and infrastructure-related exposures.
Andy Foot, managing director of marine, energy and political violence at Howden Re, said: “It’s important that markets have kept functioning throughout the crisis. Capacity remains available, but underwriting scrutiny has intensified significantly, particularly in relation to traffic risks, total WTPV and contingent accumulation scenarios.”
Howden Re said the broader reinsurance market continued to maintain strong capital levels despite higher losses for affected insurers. Treaty capacity remains broadly adequate, with recent April renewal pricing broadly in line with January levels. However, reinsurers are closely monitoring inflationary pressures and potential weakness in marine and specialty underwriting performance.
The disruption is starting to impact broader economic conditions, including higher commodity prices, pressures on global energy logistics and rising construction costs, Howden Re added. As economies adapt to higher energy inputs and tighter supply conditions, OECD growth forecasts have also been revised downwards, with other sectors beyond insurance also feeling the impact.
Michelle To, managing director of business intelligence at Howden Re, added: “The Strait of Hormuz crisis shows how geopolitical conflicts can quickly evolve into a multi-front macroeconomic insurance event. The impact is not limited to the professional category and surrounding Middle East markets, but has yet to have wider impacts across the global supply chain, impacting other business areas.”
She continued: “Importantly, this event is also testing how industry models relate geopolitical and economic risks to each other. Clients are increasingly focusing on resilience, scenario planning and understanding the concentrations that exist within their global operations.”
Howden Re concluded that while the global reinsurance system could still absorb the immediate shock, longer-term disruption or escalation of major maritime routes could significantly alter market conditions for the remainder of the year.
