War By Other Means

Small Wars Journal | Habib Badawi

Iran effectively closed the Strait of Hormuz during Operation Epic Fury by inducing private war-risk insurers to withdraw coverage, demonstrating a highly disruptive tactic of insurance-market weaponisation. This manoeuvre achieved blockade-equivalent effects without a single military interdiction, bypassing traditional naval deterrence and leaving no legally cognizable state authority.

The crisis erupted seventy-two hours after joint US-Israeli strikes targeted the Natanz and Fordow enrichment sites on February 28. Consequently, Lloyd’s of London syndicates and Protection and Indemnity clubs halted underwriting, rendering strategic petroleum reserve releases of 400 million barrels by the International Energy Agency ineffective. Tankers simply could not sail. This commercial freeze severely impacted developing Asian economies importing 60 to 95 per cent of their crude from the Gulf, while Houthi forces simultaneously resumed attacks on Suez shipping. Ultimately, this operational blueprint remains highly transferable to other critical maritime chokepoints like the Strait of Malacca or the waters surrounding Taiwan.

Comment

The commercial closure of the Strait of Hormuz during Operation Epic Fury exposes a critical vulnerability in how modern maritime security relies on private capital allocation rather than state naval power. By targeting critical infrastructure like Qatar’s Ras Laffan LNG terminal, coercive actors can manipulate the risk-pricing models of the Lloyd's Joint War Committee without engaging in direct kinetic confrontation with the US Navy. This shift demonstrates that market-driven risk aversion can achieve the strategic effects of a physical blockade without Tehran ever deploying its own naval forces. The traditional maritime security architecture, designed to counter state-sponsored interdiction, lacks the tools to offset these private underwriting decisions made in London.

The mechanism relies on the JWC designating specific waters as "Listed Areas," which instantly triggers exponential premium hikes or outright coverage exclusions for commercial hulls. Underwriters at syndicates like Beazley or Hiscox operate on strict actuarial solvency capital requirements mandated by Solvency II regulations, preventing them from absorbing unquantifiable geopolitical risks. Rapid risk-rating adjustments by the JWC for the Bab-el-Mandeb outpace the operational deployment of naval assets like Operation Prosperity Guardian, rendering traditional escort missions economically obsolete.

Strategic Question for Discussion

Which carries more weight in deterring state-sponsored maritime coercion — the physical presence of naval coalitions like Operation Prosperity Guardian or the financial risk-mitigation frameworks of the Lloyd's Joint War Committee — and what would tip that balance?

The trajectory indicates that financial risk-mitigation frameworks carry decisive weight, as commercial shipping lines prioritise insurance compliance over physical naval protection. While coalitions like Operation Prosperity Guardian can secure transit lanes, they cannot compel private underwriters at Lloyd's to lower premiums in the face of persistent asymmetric threats. Consequently, state-backed reinsurance guarantees, rather than additional naval deployments, are likely to become the primary determinant of maritime resilience in contested chokepoints.

Share your assessment in the comments below.

To read in details click here