Iran Mandates Insurance for Ships at Strait of Hormuz

Iran has officially instituted a requirement for all vessels transiting the strategically significant Strait of Hormuz to obtain mandatory insurance. This insurance, which is approved and initially provided free by Tehran's recently established Persian Gulf Strait Authority (PGSA), marks a significant shift in the regulation of maritime navigation in the region.

The terms, outlined in a document seen by Lloyd’s List, effectively circumvent a recent Memorandum of Understanding (MOU) between the United States and Iran. This MOU guarantees toll-free passage for 60 days, a provision that Iran's new insurance requirement notably contradicts. While shipowners are currently not required to pay for the coverage during this initial period, Iranian officials have indicated that this could change, with fees expected to be introduced after the 60 days lapse.

According to the PGSA, the insurance will initially incur no costs for vessel owners, with Tehran covering all expenses. However, the authority has retained the right to introduce charges in the future.

“This insurance is provided free of charge to the vessel owner, with all expenses covered by the Islamic Republic of Iran,” the document states. Nonetheless, it adds that the PGSA reserves the right to impose insurance fees subsequently.

As part of its new regulatory framework, the PGSA has claimed exclusive rights over processing transit applications and issuing passage permits. The authority has warned that any deviations from their designated pathways, particularly near Larak Island, will be strictly prohibited and could result in penalties or the revocation of passage permissions.

The new terms come at a time when several shipping companies are evaluating their transit routes due to claims of potential instability in the Strait of Hormuz. Initial feedback from shipowners, especially those using a U.S.-protected southern corridor close to the Oman coast, suggests a lack of confidence in Iran's proposed system. One tanker owner highlighted the chaotic nature of the situation, stating, “It’s madness. This whole situation is a mess.”

The US-Iran MOU, which was signed earlier this week, guarantees toll-free passage for the first 60 days, while also laying the groundwork for future discussions involving Iran, Oman, and other Gulf nations regarding a more enduring framework for safely managing the strait.

Leaders from shipping companies, regional allies, and major oil producers have underscored that any imposition of transit fees in the Strait of Hormuz would be unacceptable.

Arsenio Dominguez, Secretary-General of the International Maritime Organization (IMO), who is engaged in ongoing discussions with Iran and Oman, has cautioned that allowing such charges could set a concerning precedent for other critical maritime routes around the globe. He acknowledged receipt of the PGSA document and expressed that talks are progressing.

In response to inquiries about potential US intervention against future fees, US Vice President JD Vance reiterated the American stance that international waterways should remain toll-free, emphasising that ensuring the Strait remains open is of utmost importance. Vance noted that the MOU anticipates collaboration among Oman, Iran, and Gulf states to establish an appropriate security framework for the region's waterways moving forward.