U.S. President Donald Trump has announced a two-week, double-sided ceasefire between the U.S and Iran, marking a temporary pause in hostilities amid the raging West Asia conflict. Under the agreement, the U.S. will hold back military action while Iran has committed to ensuring safe navigation through the strategically vital Strait of Hormuz. The development is expected to provide near-term relief to global shipping and insurance markets, although industry experts caution that it may not immediately translate into lower premiums.   

Balasundaram R., Head – Marine Insurance at Policybazaar for Business, described the ceasefire as a positive step but noted that it does not signal a return to normalcy. He said that while the pause in hostilities offers global relief, it remains a temporary measure rather than a resolution of the conflict.  

Is it back to business as usual?

He said, “The ceasefire announced in the West Asia war is a welcome step. The whole world heaves a sigh of relief. Is it back to business as usual? The answer is a big NO. Ceasefire is a temporary stoppage of attacks from either side, not an end to hostilities.”    

According to Balasundaram, from an insurance perspective, safe passage for vessels through the Strait of Hormuz assured by Iran, will bring some relief to insurers. All vessels trapped in the Persian Gulf and possibly a few additional vessels from the region can come out safely through the Hormuz. “This is akin to clearance of a traffic jam. So, insurers may not drop prices immediately though larger capacity for war cover in the troubled region may be made available,” he said.     

“The larger long-term issue will be about exports going to Persian Gulf ports through the Hormuz from all over the world, that includes basic necessities such as foodstuff, meat, and general merchandise. What next? If the ceasefire extends into complete cessation of hostilities, only then can insurers breathe easy and look at easing war insurance pricing gradually,” he added.    

Ceasefire follows back-channel negotiations

Trump said the ceasefire follows back-channel negotiations, with a request for the US to refrain from deploying “destructive force.” He added that the suspension of military action is conditional upon Iran ensuring the complete and safe opening of the Strait of Hormuz for maritime traffic.    

"This will be a double-sided CEASEFIRE! The reason for doing so is that we have already met and exceeded all Military objectives and are very far along with a definitive Agreement concerning Longterm PEACE with Iran, and PEACE in the Middle East," he said.