When Risk Becomes Strategy: Why Insurers Treat the Black Sea and Hormuz Differently

War-risk insurance is supposed to put a price on danger. Yet two of the world's most dangerous maritime conflict zones raise an uncomfortable question: What kind of danger is the insurance market actually pricing?

The Black Sea has provided years of empirical evidence of maritime risk. Commercial vessels have been struck, ports and export terminals bombarded, crews killed and injured, and ships damaged or destroyed. During the renewed Russian campaign against Ukrainian maritime commerce in the summer of 2026, attacks became sufficiently intense that commercial traffic into Ukraine's major Black Sea ports virtually stopped. By August, the Financial Times described the Black Sea as shipping's "deadliest theatre," while Kpler data showed traffic into Odesa's ports falling from roughly 15 vessels per day in July to effectively zero in August.[1]

The Iran conflict has also produced attacks against commercial shipping and energy infrastructure. Yet the insurance response around the Strait of Hormuz has at times been dramatically greater.

In July 2026, additional war-risk premiums for vessels transiting Hormuz reached approximately 7.5 to 10 percent of hull value, according to Marsh, after having stood at roughly 1 to 3 percent only weeks earlier. Underwriters were simultaneously becoming less willing to offer spot coverage. Commercial activity reflected the deteriorating environment: S&P Global reported only ten Hormuz transits on July 21, compared with more than 130 daily transits before the war.[2]

At roughly the same time, despite escalating attacks against shipping in the Black Sea, market sources placed additional premiums there above 1 percent, with one estimate around 1.5 percent.[3] By August, after further attacks on vessels, ports and export terminals, broader Black Sea hull-war rates had risen to around 2 percent. Ukrainian ports such as Odesa reportedly commanded 3 to 5 percent, Danube ports approximately 1.5 to 2 percent, and Russian ports roughly 1.5 to 2.5 percent.[4]

These are not perfectly interchangeable insurance contracts, vessels, voyages or moments in time, and they should not be presented as though they are. Nevertheless, the disparity is sufficiently large to warrant investigation.

If war-risk insurance principally reflects the probability and expected magnitude of vessel loss, why can the Black Sea demonstrate sustained and lethal physical danger while portions of the Iran conflict zone command substantially greater premiums?

If physical danger alone cannot explain the disparity, what exactly is the insurance market pricing?

Two Different Kinds of Risk

The most immediate explanation is that insurers are not—and cannot be—pricing only the probability that a missile, drone or mine will strike a particular ship. They are pricing an ecosystem of consequences surrounding that possibility.

Consider two otherwise comparable vessels. One enters a combat-affected Ukrainian port while the other transits the Strait of Hormuz. Both may face a credible possibility of attack, but the consequences surrounding those risks are very different.

The Black Sea is unquestionably dangerous. During July and August, Russian attacks on Ukraine's ports and merchant shipping became so intense that major shipping companies withdrew despite the continued availability of insurance. Ukrainian officials reported more than 20 vessels damaged, while repeated attacks against Odesa's port infrastructure threatened one of the country's principal sources of wartime export income.[5]

Yet alternatives, however inadequate or expensive, exist. Cargo can move through Danube ports, neighboring states and overland transportation networks. Those alternatives cannot replace Black Sea capacity efficiently, but they provide some means of adaptation.

Hormuz presents a different problem.

The strait concentrates an extraordinary amount of global energy commerce into a narrow geographic space. There is no maritime detour around Hormuz for cargo originating inside the Persian Gulf. A tanker cannot simply sail another thousand miles to avoid the threatened waterway.

An insurer evaluating Hormuz therefore must consider more than the possibility that one tanker will be damaged. An escalation could expose numerous high-value vessels and cargoes simultaneously, generate substantial pollution and salvage liabilities, overwhelm available underwriting capacity, disrupt ports and terminals, and create correlated losses across multiple insured interests.

The market is therefore pricing both probability and consequence.

But something more interesting occurs once that price begins influencing behavior.

When Insurance Stops Measuring Risk

Insurance normally appears downstream from military action. A missile strikes a ship, insurers observe the attack, risk is recalculated and premiums rise. On its face, this is simply a market responding to battlefield conditions.

The process does not necessarily stop there.

At sufficiently high premiums, shipowners may refuse voyages, charterers may seek alternatives, financiers may object, crews may become difficult to obtain, and insurers or reinsurers may restrict or withdraw coverage. Even where insurance technically remains available, the combined cost and uncertainty may make a voyage commercially unacceptable.

The insurance response then begins changing the environment that originally produced the insurance response.

Attack → higher perceived risk → insurance repricing or withdrawal → commercial withdrawal → reduced usable capacity.

The attacker's weapon may damage one vessel. The insurance and commercial response can remove many more vessels from the contested area.

At that point, insurance is no longer merely measuring battlefield risk. It is magnifying battlefield effect.

Empirical Damage Is Not Effective Damage

This distinction exposes a broader problem with the way military effectiveness is frequently discussed.

Battle-damage assessment naturally begins with observable destruction. How many buildings were destroyed? How many aircraft were damaged? How many ships were sunk? How many pumps stopped operating?

Those are essential questions, but they are not necessarily the final measure of effectiveness.

Modern battle-damage assessment must distinguish between what an attacker physically destroys and what the attack renders unusable. In interconnected infrastructure, the latter can be many times larger than the former.

A useful distinction can therefore be drawn between empirical damage and effective damage.

Empirical damage is the destruction that can be directly observed and attributed to an attack. Effective damage is the total amount of capability removed from use because of that attack.

The difference can be enormous. A drone might destroy one transformer while forcing operators to shut down several connected substations. A missile might damage one berth while causing commercial vessels to abandon an entire port. An attack against an airfield might crater only part of a runway while forcing aircraft to disperse because another strike is expected. Similarly, an attack against one ship may damage a single hull while prompting insurers to make dozens of other ships prohibitively expensive to operate within the same geographic area.

Conceptually:

Effective Damage = Physical Damage + Induced Denial

Insurance is one potential source of that induced denial.

The Saudi Pumping-Station Exhibit

The September attack against Saudi Arabia's East-West Pipeline provides a particularly timely illustration.

The 1,200-kilometer system carries crude from eastern Saudi Arabia toward Yanbu on the Red Sea, providing the kingdom with its principal means of moving large quantities of oil around the Strait of Hormuz. As maritime conditions around Hormuz deteriorated during the Iran conflict, Saudi Arabia increased its reliance upon this western route.

That made the pipeline increasingly important to the global energy system.

On September 10, multiple attacks struck the East-West Pipeline system in the Riyadh and Madinah regions. The Saudi Ministry of Energy announced the following day that the pipeline had been shut "as a precautionary measure" while emergency and specialized technical teams secured the system and assessed its safety under established emergency procedures.[6]

Subsequent satellite imagery showed substantial fire damage at pumping infrastructure along the route.[7]

The distinction between the physical and effective damage is important.

The attackers did not need to destroy 1,200 kilometers of buried pipeline. Damage to vulnerable pumping infrastructure was sufficient to cause Saudi Arabia to halt the system while determining whether it could safely be returned to operation.

Nor does the problem necessarily disappear once engineers repair whatever equipment was directly struck.

Saudi operators must decide whether rapidly restarting surviving pumps exposes them to another attack. Repair crews may have to operate while a continuing threat remains. Undamaged portions of an interconnected system may require inspection before operation resumes. Security officials must determine whether the attack represented an isolated event or the beginning of a sustained campaign.

Insurance and reinsurance requirements could potentially become another consideration, particularly if continued operation exposes surviving infrastructure to repeated losses. There is currently no public evidence that an insurer ordered Saudi Arabia to shut the East-West Pipeline, and the Saudi government itself described the decision as precautionary. Insurance should therefore not be presented as the cause of the shutdown without further evidence.

But the larger operational dilemma remains: restore capacity as rapidly as possible and expose surviving infrastructure to another attack, or protect and salvage the remaining system while accepting a longer interruption in operations.

This is where the attacker's effective damage can exceed its empirical damage. Destroying a relatively small portion of a system can render a much larger portion temporarily unusable if the defender concludes that continued operation places the remainder at unacceptable risk.

The economic consequences were already visible within days. Reuters reported that the interruption was reducing expected Saudi crude flows toward Poland, while industry sources estimated that inventories at Yanbu might sustain exports for only five to seven days without restored pipeline flows.[8] On September 15, U.S. Energy Secretary Chris Wright said he expected the pipeline to resume operations soon but noted that Saudi authorities were still carefully assessing the damage and necessary repairs.[9]

The episode provides an unusually clear illustration of a principle relevant far beyond pipelines:

Surviving infrastructure is not necessarily available infrastructure.

The Same Problem at Sea

The same principle changes how the Ukraine-Hormuz insurance disparity should be evaluated.

Counting attacks cannot by itself establish the relative commercial danger of two theaters. The Black Sea can experience more observable attacks while a smaller number of attacks around Hormuz produce greater systemic consequences.

The important question therefore is not simply how many ships have been hit. It is how much usable maritime capacity those attacks have removed.

Insurance becomes critical to answering that question.

A tanker may remain physically capable of transiting Hormuz even when the insurance necessary to make the voyage commercially viable is no longer available at an acceptable price. In such circumstances, the water remains navigable, the sea lane remains legally open, and naval forces may even be capable of protecting passage, yet commercial access can still contract because shipowners, charterers, financiers and insurers are unwilling to accept the remaining exposure. The result is a form of sea denial produced not by physically closing the waterway, but by making its continued commercial use prohibitively risky or expensive.

By September, that distinction had become stark. An Emirates National Oil Company executive told Reuters that war-risk premiums associated with Hormuz could reach 10 percent of cargo value in some circumstances, while cargo insurance could add another 5 to 6 percent. Combined transit-related insurance costs could reach $10 million to $20 million for a voyage, and some participants were reportedly considering operating without insurance.[10]

This is not merely a more expensive shipping route.

It is a mechanism capable of determining whether commercial shipping occurs at all.

Insurance Minefields

One way of conceptualizing the phenomenon is as an insurance minefield.

A conventional minefield does not have to destroy every ship attempting to cross it. Much of its military value comes from what it causes an opponent not to do. Mines deny routes, slow movement, channel traffic toward predictable corridors, and impose the costs of clearance and protection.

Insurance restrictions can create surprisingly similar commercial effects.

An area may remain physically navigable but become commercially unacceptable because insurers or reinsurers will no longer accept the exposure, or will accept it only at a price that radically changes the economics of passage.

No physical mine has been laid, no blockade has necessarily been declared, and the insurer need not intend to assist either belligerent. Nevertheless, movement changes.

The insurer is not considered a belligerent merely because its commercial decisions affect the battlespace. Yet the aggregate decisions of insurers, reinsurers, financiers, charterers and corporate risk managers can restrict access to portions of that battlespace.

This creates another form of operational terrain—financial terrain—that exists alongside geography, weapons ranges, ports, air defenses, logistics nodes and enemy dispositions.

The usable commercial battlespace increasingly reflects the interaction of physical geography, the military threat environment and the availability of financial risk protection.

Why Hormuz Is Different

This brings the comparison back to the original disparity.

The difference between Black Sea and Hormuz war-risk pricing does not establish that one market is incorrectly priced, nor does it demonstrate that insurers are manipulating premiums.

Instead, it suggests that war-risk pricing reflects considerably more than the historical frequency of attacks. Geography and the strategic importance of the affected route matter, as do the value and concentration of cargoes, the availability of alternative routes, the possibility of multiple correlated losses, and expectations about how far a conflict might escalate. Most importantly, insurers must consider not only the potential loss of an individual vessel, but the consequences that a disruption could impose on the wider commercial system. In a globally important chokepoint such as Hormuz, those systemic consequences can be far greater than in a theater where trade has more opportunities to reroute or adapt.

The Black Sea provides an important comparison precisely because its empirical danger is so difficult to dispute.

By August, hull-war rates across the broader Black Sea had risen to around 2 percent, with Odesa voyages reaching approximately 3 to 5 percent.[11] Yet this occurred while attacks had become so intense that traffic into Ukraine's principal deepwater ports effectively stopped. The Financial Times reported that even companies capable of paying the elevated insurance costs were refusing to send vessels because the issue had become one of crew survival rather than simply price.[12]

That is an extraordinary comparison with Hormuz.

One theater was demonstrating sustained attacks severe enough to bring maritime traffic nearly to a halt, while the other could command substantially higher insurance premiums because the market was apparently assigning greater weight to the potential consequences of escalation.

Ukraine therefore serves as something approaching a control case.

It demonstrates that historical loss frequency and observable physical danger alone are insufficient to explain war-risk pricing.

Damage Can Also Be Diminished

There is another reason to be cautious about treating immediately visible destruction as synonymous with military effect.

Operation Midnight Hammer provides a useful secondary example.

Following the U.S. strikes against Iranian nuclear facilities in 2025, considerable public debate centered on the amount of physical destruction inflicted and an early, preliminary Defense Intelligence Agency assessment that reportedly suggested the Iranian nuclear program had been delayed by only months. That initial interpretation quickly became part of the political debate over whether the operation had succeeded.

Yet physical destruction was only one element of the question.

The operational consequences also depended upon whether Iran could operate the affected facilities, restore power and communications, replace equipment, recover or relocate material, return specialized personnel, and resume operations while remaining vulnerable to renewed attack.

Midnight Hammer therefore illustrates another problem with damage assessment: the perceived effect of an attack can be magnified or diminished informationally depending upon how incomplete battle-damage information is interpreted publicly.

This does not mean empirical damage is irrelevant. It means physical damage, effective damage and perceived damage are related but distinct variables.

That distinction becomes especially important when insurers and other commercial actors must make decisions before perfect information becomes available. An insurance market cannot wait months for the final intelligence assessment. It must decide whether to insure tomorrow's voyage today.

Perception therefore enters the calculation alongside demonstrated loss.

The Strategic Feedback Loop

Once insurance begins affecting commercial behavior, a feedback loop develops.

The Saudi case illustrates the process particularly well. As Hormuz became increasingly difficult and expensive for commercial shipping, Saudi Arabia's East-West Pipeline and the Red Sea terminal at Yanbu became more strategically important. The movement of commerce changed the value of the infrastructure supporting that commerce.

When the alternative route was attacked, the resulting shutdown further changed the geography of available energy transportation.

The attacker does not necessarily have to plan every stage of this process for the effect to occur. Commercial systems react independently to risk. Those reactions can nevertheless reshape the battlespace in ways that subsequently influence military decisions.

This is why insurance deserves greater attention in strategic analysis. It is not simply an expense appearing after the shooting begins. Under certain circumstances, it becomes one of the mechanisms through which the effects of the shooting propagate through the wider system.

Who Controls Commercial Access?

Naval doctrine traditionally considers sea control and sea denial primarily in military terms. Can friendly forces operate? Can the enemy interfere with them? Can merchant shipping be protected? Can mines be cleared and sea lines of communication maintained?

The experience of Ukraine and Iran suggests that another question must be added.

Can commercial actors afford and accept the remaining risk after military access has been established?

Military sea control does not automatically produce commercial sea control.

A navy might clear mines, suppress missile batteries and establish an escorted corridor. Yet if insurers, reinsurers, financiers, charterers and shipowners remain unwilling to accept the residual exposure, commercial traffic may not return at the expected rate.

Conversely, an adversary does not necessarily need sufficient military power to close a waterway physically. It may only need to create enough credible uncertainty that private risk markets and commercial operators perform part of the exclusion themselves.

The result can be commercial sea denial without complete military sea denial.

This is especially important for Western militaries and economies that rely heavily upon privately owned shipping, commercial logistics, financing and insurance. A maritime corridor that is militarily open but commercially unusable is not fully open in any strategically meaningful sense.

What Is the Market Really Pricing?

The disparity between Ukraine and Iran does not yet prove that Hormuz is overpriced or that the Black Sea is underpriced.

Making either claim would require far more detailed actuarial information than is publicly available, including insured hull and cargo values, exposure-days, claims histories, deductibles, reinsurance structures, pollution exposure, accumulation assumptions and expected-loss models.

But that uncertainty does not erase the underlying empirical puzzle.

Two maritime conflict zones can exhibit substantial kinetic danger while producing markedly different insurance responses. The Black Sea has provided repeated evidence of actual vessel losses, attacks against commercial ports and deaths among merchant crews. Hormuz, meanwhile, has at times generated considerably higher war-risk premiums and extraordinary commercial disruption.

The difference suggests that the insurance market is not simply counting missiles or estimating the probability that the next tanker will be struck.

It is attempting to price the possible consequences of future events under conditions of extreme uncertainty, including the strategic importance of the geography through which those ships move.

And because the price it produces influences whether ships sail, where cargo moves and which infrastructure remains commercially viable, the market's assessment can itself become part of the conflict.

The process is circular. Military threats create financial risk; financial risk changes commercial behavior; commercial behavior changes strategic geography; and those changes alter the importance of future military targets.

The Saudi East-West Pipeline provides the latest example. As Hormuz became increasingly difficult for commercial shipping, the pipeline became more important as an alternative. Once vulnerable pumping infrastructure was attacked, Saudi Arabia faced not merely the cost of repairing damaged equipment but the larger question of how much surviving capacity could prudently be returned to operation while the threat of another strike remained.

The physical attack and its economic consequences were no longer equivalent.

The same principle applies at sea.

A missile may damage one tanker. An insurance response can influence the movements of hundreds.

That does not make insurers combatants, nor does it establish that their decisions are improper. Insurers exist precisely to evaluate and limit risk. But it does mean their decisions can have consequences extending far beyond the insurance market.

The disparity between the Black Sea and Hormuz therefore raises a question larger than the price of a marine insurance policy:

When does war-risk insurance stop merely measuring the danger created by war and begin magnifying its effects?

The answer may help determine whether the next maritime chokepoint is actually closed by missiles and mines—or remains physically open while the ships simply stop coming.

Endnotes

1. Financial Times, “Sun, Sea and Bombs in Odesa,” August 13, 2026. Reporting described the intensifying Russian campaign against Odesa's ports and commercial shipping and cited Kpler data showing August traffic effectively halted.

2. S&P Global Commodity Insights, “Middle East Shipping Insurance Costs Rise on Hormuz Risks: Marsh,” July 22, 2026. Marsh reported Hormuz additional war-risk premiums rising from 1–3 percent to 7.5–10 percent of hull value and declining underwriting appetite; S&P reported ten transits on July 21 versus more than 130 daily before the war.

3. The Insurer, “Black Sea Marine Rates Rise Above 1% After Russia and Ukraine Escalate Attacks,” July 21, 2026. Market sources reported rates above 1 percent, with one broking estimate around 1.5 percent.

4. The Insurer, “Upward Pressure Remains on Black Sea Marine War Rates,” August 19, 2026. The report placed broader Black Sea hull-war rates around 2 percent, Ukrainian ports such as Odesa at 3–5 percent, Danube ports at 1.5–2 percent and Russian ports at 1.5–2.5 percent.

5. Critical Threats Project/Institute for the Study of War, “Russian Offensive Campaign Assessment,” August 2, 2026; Financial Times, August 13, 2026. Ukrainian officials reported more than 20 ships damaged, while continued attacks substantially reduced commercial traffic.

6. Saudi Press Agency, “East–West Pipeline Shut Down as a Precaution Following Multiple Attacks,” September 11, 2026. The Saudi Ministry of Energy said the pipeline had been shut as a precaution while specialized teams secured and assessed the system.

7. Satellite imagery released after the attack showed substantial damage to pumping infrastructure along the East-West route. Contemporary reporting identified extensive fire damage at at least one pumping station.

8. Reuters, “Orlen Sees No Immediate Supply Disruptions as Saudi Oil Deliveries Set to Drop,” September 14, 2026. Industry sources estimated Yanbu inventories could sustain exports for approximately five to seven days without restored pipeline flows.

9. U.S. Energy Secretary Chris Wright said on September 15 that the pipeline was expected to resume operations soon while Saudi authorities continued assessing damage and repair requirements.

10. Reuters, “Oil Vessel Transit Costs Through Hormuz Escalated After Iran War, ENOC Exec Says,” September 9, 2026. ENOC director Paul Bradshaw described cargo insurance reaching 5–6 percent in some cases and additional war-risk costs reaching as high as 10 percent, with total transit-related costs potentially reaching $10–20 million.

11. The Insurer, August 19, 2026.

12. Financial Times, August 13, 2026. Ukrainian port officials reported that some companies declined voyages despite being able to afford insurance because crew safety had become the overriding concern.