by Xinhua writers Gao Wencheng and Zhao Jiasong
LONDON, April 8 (Xinhua) -- The U.S.-Iran ceasefire is a welcome development, but underwriters will continue to monitor the situation closely as the region remains at heightened risk, a British insurance insider said Wednesday.
In an interview with Xinhua, Neil Roberts, head of marine and aviation at the Lloyd's Market Association (LMA), deemed insurance as fundamental to global trade, saying that marine insurance underpins maritime trade and that "the provision of the insurance is more important than the price."
Since Feb. 28, the United States and Israel have launched large-scale military actions against Iran, and Iran has retaliated against targets including Israel and U.S. military bases in the Middle East. As a result, war risk insurance for vessels has become a key focus for the market.
Roberts explained that war risk is generally excluded from hull, cargo and other standard insurance policies and is instead handled by specialist war underwriters.
According to the LMA expert, war risk insurance typically includes two types of premiums -- an annual premium covering general areas and an additional premium for high-risk regions.
A mechanism called the Listed Areas requires shipowners to notify underwriters when entering these zones, he said, adding that currently, there are roughly 24 such areas, including newly designated areas in the Gulf.
Regarding the recent conflict, Roberts noted that the market adjusted the Listed Areas rather than withdrawing coverage and that as the conflict developed, the risk clearly increased, with about 25 vessels attacked. Premiums are adjusted accordingly to cover potential losses.
He stressed this is a highly commercial market and that prices are unlikely to remain elevated for long.
Addressing concerns about a so-called "soft blockade" in the Strait of Hormuz, he confirmed that there is no insurance-imposed blockade. The real constraint comes from vessel owners and masters who are cautious due to safety risks in the conflict zone.
Commenting on the ceasefire, Roberts said it is still very early, and underwriters are closely monitoring developments, as the notification mechanism allows for a voyage-by-voyage basis and premiums remain proportional to risk, decreasing as the situation improves.
Asked whether the recent conflict might have long-term effects on the war risk market, Roberts indicated that the market is designed to handle such events.
Although this conflict was intense, it was relatively brief, and the overall mechanism is expected to remain unchanged, he added. ■