Vessel attacks in the Gulf of Oman – How does it impact cargo insurance?
Two oil tankers sustained damage due to attacks on Thursday, 13th of June from a yet to be identified cause. In a separate incident on May 12th, four oil tankers were targeted off the coast of the United Arab Emirates in the Gulf of Oman.
How does it impact cargo and stock throughput policies?
At this stage there is uncertainty about the actual cause of last week’s events. Although most cargo owners are primarily concerned with potential loss to their business, the actual cause might have a substantial impact to insurance cover.
Differences between the cause of the event—be it war, terrorism or an accident will drive the possibilities insurers will have with regard to potentially cancelling covers or charging additional premiums. If the events are caused by external perils, not being defined as war or terrorism, most insurance policies will provide cover per policy conditions. However, if the events are caused by perils which are defined as war or terrorism, the impact to the insurance policies might trigger additional premiums and/or cancellation of covers. A rising oil price might also put policy limits under pressure.
Key areas of focus at this stage:
- Notice of cancellation can be given by insurers in case they deem the events to be a war risk. In most cases this also applies in case insurers deem the event to be a terrorism risk. A typical notice period for these risks is 7 days. Aon can offer a range of solutions to urgently deal with a notice of cancellation.
- Additional Premium can be charged by insurers in case the area is considered to be a war area. Vessel owners and operators are facing these consequences already and cargo owners should be prepared for these developments.
- Oil prices may increase. Although we have not seen oil prices increase, the general opinion is that there is a considerable risk that oil prices will rise due to these events. Such an increase in price might put policy limits under pressure. With Aon’s unique Aon Client Treaty, Aon is able to optimise insurance limits by efficiently obtaining additional insurance capacity.
Supply chains can present a myriad of risks, as exemplified by this incident.
About Aon’s Global Commodity Practice
Aon’s Global Marine Commodity Practice is part of our Global Marine Practice and is structured to deliver global capabilities, locally. The team, comprising 30 experts, is focused on providing market-leading service in the marine commodities field.
Aon views the commodities business as a global operation. Therefore, we do not limit our clients to local markets but offer all of Aon’s global broking and servicing capabilities to them. Our unique structure enables us to serve our clients and access global insurance markets wherever they may be.