Is Maritime Risk in the Strait of Hormuz Mispriced?

Key Takeaways

• The ongoing conflict in the Strait of Hormuz has exposed a maritime commerce landscape ultimately dictated by risk evaluation and tolerance, with insurance premiums playing a crucial role in determining the flow of trade through uncertain areas.
• While the nature of the 2026 Hormuz Crisis bears geopolitical parallels to the Iran-Iraq Tanker War, though the former is nevertheless characterized by selective strategic targeting of commercial vessels, while the latter embroiled military aims with international shipping.
• Therefore, with lower frequency of attacks in 2026, and maritime damage not causal to military victory, there is little indication that the scale of insurance fallout will exceed that of the Tanker War, in spite of current war risk premiums arguing otherwise.

Historical Background and Present Day

• The 2026 Hormuz Crisis developed rapidly. Iran’s IRGC conducted 22 confirmed attacks on merchant vessels in the weeks following the outbreak of hostilities, prompting the London market’s Joint War Committee to designate the entirety of the Persian Gulf a conflict zone.
• Tanker traffic collapsed by more than 80% within 48 hours, and benchmark war risk premiums spiked to as high as 10% of hull value per transit, against a peacetime baseline of 0.25%. For a modern Very Large Crude Carrier worth approximately $138 million, a single Strait transit implies a per-voyage premium of $10 to $14 million, where the same trip might have cost $300,000 before hostilities began.
• Over the course of the 1984-1988 Iran-Iraq Tanker War, more than 400 vessels were struck in a sustained campaign where the destruction of commercial shipping served explicit military aims, with hull war risk premiums peaking at 7.5% of vessel value. The 2026 crisis, by contrast, is characterized by selective and episodic targeting, oriented toward political signaling rather than strategic attrition of maritime commerce.

The Cordoba View

• From Cordoba’s perspective, the 2026 Hormuz Crisis has been fundamentally mispriced by maritime insurers to their own benefit. While instances with alleged unprovoked commercial damage have occurred, these events are isolated and not part of a concerted strategy of strategic destruction on either side. This stands in stark contrast to the Tanker War of 1984-1988, which specifically targeted commercial shipping. With this clear distinction between present and past established, we are left wondering why premium rates in today’s risk landscape are in similar ranges to, and in some cases higher than a period when widespread destruction of commerce was a strategic aim. Our answer is that leading insurers, such as CNA, AIG, and Gard have become more conservative pricers of risk, reducing the likelihood of catastrophic losses while retaining higher short-term earnings. Additionally, due to the necessity of insurance services in maritime shipping, vessel owners and operators will be paying elevated premiums even after the danger of immediate losses has passed, bolstering the medium to long-term security of underwriter’s risk portfolios.

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