Iran Imposes Mandatory Insurance on Vessels Transiting the Strait of Hormuz, Fees Likely to Follow

Iran has introduced a mandatory insurance requirement for all vessels transiting the Strait of Hormuz, the world's most critical energy chokepoint, through which roughly 20-25% of global seaborne oil and a large share of LNG normally flows. According to a Persian Gulf Strait Authority (PGSA) terms-and-conditions document first reported by Lloyd's List on June 19 and analyzed by Insurance Business on June 22, every transiting ship must now carry insurance approved — and initially provided free — by the newly created Iranian body.

The move directly complicates a US-Iran Memorandum of Understanding signed on June 17, 2026, which guaranteed toll-free passage of commercial vessels for 60 days following the interim peace deal that ended months of conflict. While the PGSA insurance is free during the MOU window, the document explicitly states the authority 'reserves the right to introduce insurance fees in the future' — language industry observers read as Iran establishing a legal and commercial precedent for tolling the strait once the 60-day window expires.

The requirement carries serious underwriting and legal implications. First, the PGSA designates itself as the sole approving authority for transit insurance — not shipowners' existing underwriters or the International Group of P&I Clubs. Second, the document contains an open-ended penalties clause allowing the PGSA to revoke passage permissions or take legal action against non-compliant vessels, with no specified adjudicating forum. Third, and most critically, the PGSA itself was designated by the US Office of Foreign Assets Control (OFAC) in May 2026 — meaning that after the free window, a shipowner acquiring PGSA-approved insurance could be paying a US-sanctioned entity.

The insurance backdrop remains volatile. War-risk premiums for Hormuz transits surged from roughly 0.05-0.2% of hull value before the conflict to as high as 5% at the peak, meaning a $150 million tanker faced an insurance bill of up to $7.5 million for a single voyage. The US government stepped in with a $40 billion reinsurance program anchored by Chubb, and Lloyd's and Chubb recently launched a consortium offering $200 million in hull and P&I capacity plus a further $200 million for cargo. IMO Secretary-General Arsenio Dominguez warned that allowing such transit charges would set a dangerous precedent for other strategic waterways. US allies led by the UK are reportedly pressing the Trump administration not to normalize Iran's attempt to introduce fees.