Iran plans to offer insurance for Hormuz transit: Will it work? | US-Israel war on Iran News
Iran Establishes New Authority to Control Strait of Hormuz
Iran has taken further steps to assert its influence over the strategic Strait of Hormuz, as the country’s Supreme National Security Council announced the creation of the Persian Gulf Strait Authority (PGSA) on Monday. This new body aims to provide “real-time updates” on operations within the vital waterway, which is essential for the global oil and gas supply, accounting for approximately 20% of worldwide exports.
The announcement follows reports that Iran intends to offer insurance for vessels navigating the Strait of Hormuz, as detailed by the semi-official Fars news agency. The insurance scheme, which is expected to involve cryptocurrency payments, aims to bolster Iran’s financial resources amid ongoing military tensions in the region.
Since the onset of conflict involving the U.S. and Israel on February 28, Iranian officials have discussed the potential for implementing transit charges or security fees. There have been assertions that Iran has already started collecting fees from vessels transiting the strait. The country has effectively restricted movement through the strait in response to U.S.-Israeli military actions, leading to significant disruptions in global energy markets.
Opposition to any form of toll on maritime traffic has been voiced internationally. The U.S. State Department has reiterated that international waterways should remain accessible for global shipping without unilateral fees. China has also expressed disapproval of any measures that might restrict navigation through this crucial maritime corridor.
Details of the Proposed Insurance Scheme
According to the Fars report, a website named Hormuz Safe has begun offering various insurance products for maritime cargoes traversing the Strait of Hormuz. The proposal includes encrypted verification for vessels and the use of cryptocurrencies like Bitcoin for transactions. The scheme could reportedly generate over $10 billion in annual revenue for Iran, covering cargo from confirmation and providing a signed receipt to the owner.
Iran has indicated that the revenue from these fees is intended to support repairs following extensive military strikes prior to the current tensions, during which the strait was largely open to vessels.
Concerns Over the Insurance Scheme
Many shipping companies might perceive this insurance offer as a de facto transit charge. Reports indicate that Iran has previously collected transit fees, with amounts reaching as much as $2 million per voyage. The new proposal appears to reframe these fees as a commercial insurance service rather than a direct toll.
Experts point to significant challenges that Iran may face in implementing such an insurance scheme. Abdul Khalique, an academic at Liverpool John Moores University, noted that sanctions severely restrict Iran’s access to global financial markets, which are essential for covering large-scale insurance claims. Without reliable reinsurance, shipowners may question whether claims would be honored after incidents.
Additionally, geopolitical factors complicate the matter; since April 13, the U.S. has enforced a naval blockade impacting maritime traffic to and from Iranian ports. It remains uncertain whether the U.S. would permit vessels that have paid for Iranian insurance to transit through the strait.
Impact on Global Maritime Insurance
In light of the ongoing conflict, global maritime insurers have significantly raised war-risk premiums for vessels entering the Gulf. Since the war began, some leading insurers have canceled coverage for operations in the region, although some have re-entered the market with governmental backing.
Despite the renewed insurance offerings, shipping companies remain cautious, with many avoiding Gulf routes due to safety concerns. The U.S. has warned that payments for safe passage through Hormuz might expose companies to sanctions.
International Reactions to Iran’s Moves
To date, no countries or shipping firms have publicly indicated an intention to accept Iran’s insurance offer for traversing the Strait of Hormuz. The U.S. and China have united in emphasizing that no nation should impose transit fees for shipping in these waters. Following a meeting between U.S. President Donald Trump and Chinese leader Xi Jinping, it was made clear that China opposes the militarization of the strait.
United Nations Secretary-General Antonio Guterres has called for unimpeded access through the strait, asserting that tolls or discrimination against vessels should not be allowed.
Experts suggest that acceptance of the Iranian insurance scheme may be limited to countries already wary of Western sanctions, while most shipping powers are likely to remain hesitant. Trust, enforceability, and adherence to internationally recognized legal standards are fundamental to maritime insurance, and many operators rely on established insurers from Europe or Asia, making widespread participation in the Iranian scheme unlikely.
