How Insurance Shapes Trade in the Strait of Hormuz

How Insurance Shapes Trade in the Strait of Hormuz
May 14, 2026 12 mins

How Insurance Shapes Trade in the Strait of Hormuz

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Aon transport and marine leaders examine the evolving risk environment in the Strait of Hormuz — one of the most critical corridors for global energy and trade.

Key Takeaways
  1. Insurance remains available to support global trade through the Strait of Hormuz, even as risk has intensified and pricing has adjusted significantly.
  2. Marine and war insurance mechanisms are designed for active risk management.
  3. Leadership advantage comes from preparedness and adaptability.

Intro
Hello and welcome to this Global Insight episode of the On Aon podcast. 

Today, we’re looking at the Strait of Hormuz — that narrow stretch of water with outsized influence on global energy, shipping and supply chains. And while the headlines tend to focus on the geopolitics, the reality is more practical: when risk spikes, the question becomes whether trade can move at all — and on what terms.

To unpack what’s happening now, how markets are responding, and what leaders should be watching for next, here are Aon’s Phil Smaje and Lee Meyrick.

Phil Smaje
Hello and welcome to this Global Insight episode of On Aon Podcast. I'm Phillip Smaje, Global Industry Specialty Leader for Transportation and Logistics here at Aon. And today we're taking a step back from the headlines to look at what's really happening in and around the Strait of Hormuz through the lens of risk, insurance and global trade.

As events continue to evolve day by day, the strait remains one of the most strategically important corridors of the world, particularly for energy, shipping and supply chains. But what is often overlooked is the vital role insurance plays in ensuring global trade runs smoothly. 

To explore what we're seeing, how insurance markets are responding and what businesses should be focused on in the months ahead, I'm joined by my Aon colleague, Lee Merrick, Chair of Risk Capital for Transportation Logistics at Aon. It's great to have you with us, Lee.

Lee Meyrick
Great to be here, thanks Phil.

Phil Smaje
So let's get going. Lee, before we get into the insurance specifics, let's set the scene. It's such a fluid situation. It seems every day we wake up and there's a slight change of course. 

So as we record today on the 7th of May, from a risk perspective, what makes the Strait of Hormuz such a critical focal point?

Lee Meyrick
Phil, think, as you say, we continue to see daily a reminder of the fact that it is such an essential choke point for energy coming out of the Middle East into Asia particularly. That's impacted transits and supply of oil, but also LNG, and that has had an impact on the wider trade flows. 

It's interesting to see how it's become a strategic political asset as well, because the straits are very narrow. I think that's 33 miles at their narrowest. But of that, there's only a couple of miles of navigable shipping channels. So it makes it really easy, as we've seen, to block and for there to be a real impact and hindrance to the trade. 

So we've seen an impact both in terms of the actual movement of oil, but also the price of oil.

I was listening on the radio this morning that one of the largest ship owners in the world, they said that their monthly fuel bill has doubled since the period with an increased cost of $500 million per month. 

And the CEO said that's actually going to have to be passed on to their customers and eventually to final consumers. It's having an immediate impact, but it's also having lots of consequential impacts, which think we're all starting to feel now.

Phil Smaje
Yeah, you mentioned that it's become the strategic element or the key strategic element in the conflict. And obviously the reason for that is the impact on global trade. We've seen fuel price volatility. It's gone up markedly as you comment, then depending on what's been said, can move down before it's moved up again. And as you correctly point out, it's very narrow and therefore control over it is perhaps easier if the geography of it was different. As I understand it, it's effectively one lane in and one lane out. 

So we're monitoring that. There's obviously a lot of accumulation in the area and very little movement. We've seen some movement, but very little than under normal circumstances. 

So what role does insurance play in enabling shipping and supply industries to best function given this uncertainty?

Lee Meyrick
Marine insurance, particularly by all forms of transportation and logistics insurance, really does keep global trade moving. 

If you think about the costs of those assets, the vessels and also the cargos on them, or aircraft, but also the liabilities that ship owners incur when shipping goods around the world, particularly in and around pollution risks. 

Insurance is not a secondary thought is an absolute underpinning of global trade. And we've seen it in several instances in the past, recently in the U.S. with the Dali incident and the Baltimore Bridge, that the insurance, marine insurance world has responded well over the past years to large incidents. 

I think what we're seeing now is that there's an increase in both frequency and severity of new risks. And whilst geopolitical risks, as in the case of the current situation in the Strait of Hormuz, isn't new, I think the frequency and severity of these incidents are putting pressure on the marine insurance industry. 

Now, the marine insurance industry has responded well, and there's a tried and tested process of marine insurers providing war cover.

But we have, in this instance, you mentioned up to 1,500 to 2,000 vessels with values —it's hard to see what the actual values are, but we're hearing reports of $35 to $40 billion of vessel values alone. So that's a lot for an insurance industry to take into account. If this is going to happen more and more, as I say, go back to the beginning of the comments. 

Marine insurance particularly keeps trade going. It's facing increasing risks at the moment. And I do think as time goes by, the industry could and should use the recent events to look at how best we might continue to develop going forward.

Phil Smaje
So I think what you're saying there is there is a huge focus, particularly from the C-suite in these situations around accumulation for the marketplace, also by insure it actually has some parallels to what happened in the aviation market with Russia/Ukraine, which has seen very substantial losses bleeding through into market after substantial litigation. 

And so being able to track the accumulation, because I think what happens is there's an event, a shock event, and then management speak to line underwriting, in this case, marine and say, okay, so what's your exposure? And they expect an answer. 

And it's not always so straightforward because for marine underwriters, there's obviously the vessels, but there's also cargo, which is almost impossible to monitor the accumulation. It's something that I think everyone needs to understand so that when we go through that mechanism where there is a review.

The terminology is Notice of Cancellation, but it has been discussed a lot. It's more of a review mechanism within the policies that it allows insurers to reassess the risk given the change of circumstance. It gives them a little bit of breathing space to get better understanding in their arms around the accumulation, which may not have the perfect answer, but have a better answer and then rerate the risk accordingly. What I would say is the market is open for business, the traditional market. The mechanism has stood the test of time over a substantial period of time since the Lloyd's coffee shop days. 

And our expectation is that markets respond in distressed situations for clients as they would expect us to do likewise. 

So how is the insurance market responding right now to the current situation? And when the political risk intensifies around major trade corridors, how do you see it typically responding?

Lee Meyrick
As you mentioned, I'm very proud of the way the marine insurance market has stood up to the events recently and in the past. As you quite rightly said, the notice of cancellation, miscommunication, or miscomprehension caused a lot of hand-wringing and some activities which weren't particularly helpful. But the market in and of itself, and London is probably the epicentre of war risks underwriting has responded well. It provides a price —  a dynamic price based upon the risk that presents itself. And the risk is still very real. We've seen very few transits through this trade of homeowners. And now I don't know when we're going to get back to normal transit, but there's still a real risk. 

But despite that, the insurance market has responded. Pricing is relevant to that heightened risk. It's very expensive in some instances. And shipowners are incurring costs, increased fuel, increased cost just to keep their vessels at anchor without any revenue. 

So there's a response that's worked and is working. And what we've seen in this instance is governments or market bodies come together to try and ease the financial burden and to speed things up, which is helpful.

Not necessarily we've seen many risks bound to these alternatives. But I do think that as we go forward, particularly as risk capital is starting to merge and the way we're set up at Aon as in risk capital helps a lot in that respect. We've got better data. We've got different forms of capital that can be used in instances like this to just provide quicker and maybe more cost effective solutions going forward.

Phil Smaje
Yeah. And you make a great point about Risk Capital and you know, I'm a big believer in that as a great differentiator for Aon. And I know that you have recently, and we have worked really seamlessly with our reinsurance and Aon securities colleagues in terms of accessing reinsurance capacity and capital market capacity for clients. I think in these situations, traditional markets to some extent want to defend their patch.

And sometimes they don't always get the pricing right. And we're in a marketplace where there is an inconsistency. But what's for sure is there are people that will step forward and perhaps be, I'm going to use the word brave, and there's others that will be more cautious. And actually what happens for the most part is those that are braver, if they manage their portfolio correctly, can do quite well out of these situations. And by that, what I mean is they're being commercial, they're taking risk, but there's some return on that investment.

Lee Meyrick
Yeah, it's a supply and demand, it? And as we normally see through war events, is the pricing finds an equilibrium at some point where the various capital flows come into place. But yeah, it's a way over many decades that Hull and Machinery underwriters particularly have managed to smooth out the Hull and Machinery results by writing war risks.

Philip Smaje
As companies look ahead, what should they be paying closest attention to in the coming months?

Lee Meyrick
I think as I say, having contingency plans —  the supply chain is, and we've seen it over the last, I don't know, six, seven years, we saw it with COVID, we've seen it with Russia, Ukraine, we saw it with the Evergreen getting stuck in the Suez Canal. 

The supply chain is very delicate and very complicated, and it only takes a little bit of a delay or a disruption for it to upend and the impacts are felt far and wide. 

So having an understanding of the issues, the risks, the choke points, trying to get some redundancy, and I don't like using that word, but some fat into the system is helpful. 

But we've seen both with this latest situation — and in prior situations with the US and Chinese trade, ongoing trade discussions — supply chains have changed. There's a lot more regional traffic going on there. We've become less globalized over the last six months or so where people look to have trading partners within both an ideological and political similar mindset, but also from a geographical perspective.

I think having that adaptability is something which we would recommend. Obviously, as and when clients are thinking about that, talking to their broker and their insurers and just making sure that they're taking on input from all those parties, I think would be very useful.

Philip Smaje
As things develop and trade and traffic moves, it'll be interesting to see which insurers respond in which way. There won't be consistency. We wouldn't expect that. It is a marketplace after all. And of course, our primary focus is on supporting clients through these difficult times. 

Thank you, Lee. As expected, that was a really helpful perspective. 

And that's it for today's episode of Global Insight. As the situation continues to evolve, our focus at Aon is on helping clients understand what's happening now to inform them, what to watch out for next, and how to make informed decisions with confidence. 

In the months ahead, as this situation continues to evolve, we'll continue to bring you Global Insight episodes focused on the most pressing geopolitical and regulatory developments shaping the business environment. 

You can find more resources in the show notes and as always, we encourage you to reach out to your Aon team to continue the conversation. 
Thank you for listening.

Outro
Thanks for tuning into the latest episode of On Aon. If you enjoyed this episode, don’t forget to subscribe wherever you get your podcasts and be sure to visit Aon.com to learn more about Aon. 

We’ll be back again with another episode — our Human Capital Insight, looking at the growing popularity of pooled DC pensions.

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