[Iran Crisis] Insurance Regulatory Authority: War risk insurance premiums for the shipping special risk pool have increased 5 to 10 times compared to before the war

The outbreak of war between Israel, Iran, and the escalation of tensions in the Persian Gulf. Zhao Weiyang, Deputy Director of the General Business Department of the Insurance Authority, stated that after the start of the Middle East war, high-risk maritime areas worldwide have increased, and the current war risk insurance premiums have risen tenfold compared to before the conflict. As for the war insurance premiums of the “Marine Specialty Risk Pool,” established in Hong Kong last November to provide geopolitical and war risk coverage for Chinese and Hong Kong-registered ships, the increase ranges from 5 to 10 times.

Under the promotion of the Financial Services and the Treasury Bureau and the Insurance Authority, Hong Kong established the commercial Marine Specialty Risk Pool last November. Zhao Weiyang said that this insurance pool provides war risk coverage for Chinese and Hong Kong ships, enhancing their ability to respond to emergencies. Currently, five insurance companies participate, with an underwriting capacity of about US$130 million. Looking ahead, more Chinese insurance companies are expected to join to increase capacity.

Zhao Weiyang revealed that more than ten Chinese ships insured by the Hong Kong Marine Specialty Risk Pool are operating in the Persian Gulf, all of which are cargo ships. No claims have been received so far. After the outbreak of hostilities, some shipowners have inquired about coverage from the risk pool.

The Director of the Insurance Authority, Zhang Yunzheng, stated that the concept of the “Marine Specialty Risk Pool” is similar to “national ship and port insurance.” When the market sees significant increases in premiums, considering that China’s fleet is currently the largest in the world, it is necessary to consider whether to follow international market prices or to have some pricing authority in Hong Kong itself. He also mentioned that from an underwriting perspective, ships flying the Chinese flag operating in war-risk areas face risks that may differ from those faced by ships from other countries in the same regions. Therefore, it is necessary to consider whether Hong Kong’s underwriting standards should align with global standards.

Currently, ships can purchase marine insurance, but standard marine insurance does not cover war risks. Those in need must purchase separate war insurance, which mainly covers the hull of the ship.