00:0020% of the world's oil is shipped through the Strait of Hormuz.
00:03In the past two days, at least six cargo ships have been attacked in the waterway.
00:08It's creating huge challenges for the companies that insure these vessels.
00:12Marcus Baker is the global head of marine cargo and logistics at Insurance Group Marsh.
00:18Marcus, thank you so much for your time.
00:20Is it fair to say that any ship wishing to go through the Strait of Hormuz
00:24is essentially uninsurable because of the high risks?
00:29Sally, hi. Thanks very much for having me on.
00:31Look, at the end of the day, the answer to that is no.
00:35We have within the insurance market a well-trodden mechanism
00:40that has been in place for decades and reacts incredibly efficiently to situations like this.
00:47And despite what I think many people read and was written in the last week
00:51about insurance being cancelled, whilst that is technically true,
00:56what we have seen is that insurers have re-engaged,
01:00as is their right to do, under policy terms and conditions,
01:04and have been offering cover if ships want to trade up through that area.
01:08So the short answer is it's insurable if you are prepared to take the risk.
01:12Well, that's the thing.
01:13I want to know how much war cover has essentially increased for this region.
01:17Can you give us an idea?
01:19Yeah.
01:20Look, I mean, before the 28th of February,
01:23we were seeing rates of around 0.25% to 0.5%,
01:28and that's on the value of the ship.
01:31So now if you want to go through the Straits of Hormuz,
01:34that's at least in the 3% territory.
01:36And I think you mentioned six ships have been hit.
01:40We're calculating around about 24 so far have been damaged or attacked in some way
01:47since the 28th of February.
01:49So, you know, clearly that's getting more difficult.
01:51The rhetoric that we're hearing from Iran is going to put further pressure on.
01:55So I think that we'll just have to see.
01:57This is a moving and a fluid situation,
01:58and the market is reacting appropriately.
02:01On a scale of normal to what happened to the insurance industry during COVID times,
02:06how bad is this current crisis?
02:10Ah, that's such a good question.
02:13Look, I mean, I think we're going to have to wait and see how things pan out.
02:17It really depends on the longevity.
02:18If this is short and is taken care of quickly,
02:23then I think we can, you know,
02:25we can see things return to a degree of normality over a matter of weeks.
02:30If this goes on for a long period of time,
02:32the supply chain issues are extreme.
02:35And it's not just about, by the way, getting 20% of the world's oil out.
02:39It's about delivering food and supplies to the UAE, Abu Dhabi, Bahrain, and so on.
02:46And so, you know, container ships moving up there also need to get up there to support those countries.
02:51Shipping in the Red Sea is also looking more risky.
02:55This week we've seen threats of renewed attacks from Houthis in Yemen.
03:00What impact could we see from two regions in the Middle East having extremely unsafe waterways?
03:09So, again, we've seen this before.
03:12You know, travelling through the Suez and the Red Sea is something that makes sense
03:16because it creates quicker journeys to Asia from Europe and also from Asia into Europe and the US.
03:24But ultimately, you know, ship owners do have another option, and that's to go around the Cape.
03:30Now, it adds seven to ten days in terms of time on the journey time to Asia, but that's possible.
03:37So, you know, we will see that happen for crew safety, ship safety, and reasons like that.
03:43But it will impact trade, and it will impact oil trade as this starts to develop.
03:49And clearly, that's not something that we want to see accelerated any further.
03:54Indeed. Thank you so much for sharing your expertise.
03:58Marcus Baker is the Global Head of Marine Cargo and Logistics at Insurance Group Marsh.
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