​​​ISTANBUL

Marine insurers started canceling war risk coverage for vessels operating in the Persian Gulf after the joint military strikes by the US and Israel against Iran on Feb. 28.

Tehran closed the Strait of Hormuz to commercial traffic on Monday, prompting private insurers to issue cancellation notices for policies covering Iranian and neighboring waters.

US President Donald Trump said Tuesday that the US Navy would escort tankers passing through the Bosphorus if needed, while ordering political risk insurance and coverage to be provided at a reasonable price point for the financial security of maritime trade passing through the Gulf.

Ozgur Bulent Koc, acting general manager at insurance firm Turk Reasurans, told Anadolu that the only viable solution to the insurance crisis is for governments to provide the necessary coverage.

“Normally ships have war coverage but that coverage is canceled within seven days from the start date of the event, and it’s likely that the war coverage the ships there obtained will be canceled and not renewed, and there’s currently no firm providing reinsurance,” he said.

“Countries will have to evaluate this situation themselves -- the insurance sector is not considering providing coverage, so we can safely say no one is currently providing coverage for the situation in the region,” he noted.

Koc said the insurance and the reinsurance market could return to normal if the war risk disappeared but war coverage premiums may remain slightly more expensive for a while amid rising global risks.

He noted that the developments also affected aviation influence due to the targeting of Dubai and Kuwait airports.

“We don’t know the full extent of the damage, but imagine, with Doha carriers all closed, and the planes parked waiting, this would mean a serious loss of business for airlines in the region, insured or not,” he said.

He stated that Tehran’s attacks on Saudi Aramco facilities highlighted the immense risks to strategic energy infrastructure in such turbulent times, noting that energy conglomerates typically have specialized political violence insurance, and the financial damages will ultimately fall on the global reinsurance sector.

Meanwhile, the destruction of residential homes and shopping centers are generally covered directly by affected countries’ governments.

Koc said that purchasing political violence insurance for civilian properties is highly uncommon.

He added that the global reinsurance market maintains a buffer of up to $58 billion or so for extra annual losses, which means that the industry can absorb the current financial shocks without immediately hiking rates -- the broader insurance sector will remain largely insulated in the aftermath, while affected countries will pay the significant economic losses.

*Writing by Emir Yildirim in Istanbul