Reinsurer Korean Reinsurance Company is reportedly discussing introducing ship insurance for carriers that plan to transport cargo via a detour route to avoid the Strait of Hormuz, in partnership with nonlife insurers. As the blockade of the Strait of Hormuz drags on and some carriers plan to transport cargo through alternative routes, Korean Reinsurance Company also appears to be preparing to attract related insurance policyholders.
According to the insurance industry on the 14th, Korean Reinsurance Company is discussing with some nonlife insurers whether to introduce insurance for ships that detour to avoid the Strait of Hormuz. With the blockade of the strait prolonged, some carriers are reportedly planning to send follow-up ships to offload cargo from vessels that are staying put and then carry it via alternative routes. Carriers pursuing this plan are said to have asked nonlife insurers whether the follow-up ships can obtain hull insurance.
Korean Reinsurance Company is reviewing whether to introduce a reinsurance product after receiving updates on the situation from nonlife insurers. If the launch is confirmed, Korean Reinsurance Company plans to check whether other reinsurers release similar products and then attract subscriptions by offering nonlife insurers a lower commission rate.
Reinsurance refers to transferring all or part of the liability under an insurance contract to another insurer. Typically, insurers buy reinsurance to prepare for situations in which a major accident requires the payment of large claims. Generally, nonlife insurers decide whether to renew ship insurance in roughly one-year cycles, but in special circumstances such as war, they sell products that are effective for a single voyage. Reinsurance contract cycles are adjusted accordingly.
Risks in the Strait of Hormuz have been rising after the U.S. airstrike on Iran. The strait sees a high volume of ship traffic, with about 20% of the world's crude shipments passing through, and waters deep enough for very large crude carriers exist only within Iran's area.
Iran, hit by attacks from the United States and Israel, is blocking the passage of ships in the Strait of Hormuz. Some Korean-flagged vessels are currently trapped in the strait. Tensions are mounting as the United States recently began maritime control operations against Iran in retaliation for the blockade of the strait.
A Korean Reinsurance Company official said, "After surveying insurance demand for ships operating on detour routes with nonlife insurers, we will set reasonable rates and launch the product."