- within Environment topic(s)
In July 2026, the Lloyd’s Market Association (LMA) published a model clause for marine hull underwriters to address 'transit fee/toll' demands linked to passage through Iranian territorial waters/the Strait of Hormuz.
The clause is intended to operate alongside existing sanctions clauses and to give the market a clear contractual position where insurers become aware (or “ought reasonably” to become aware through due diligence) that financial or non financial consideration has been paid to facilitate transit.
The practical coverage outcome is blunt: insurers will not cover the fee/toll payment, and cover for the relevant vessel ceases once a payment has been made, reflecting perceived risk of breaching US/UK/EU sanctions and/or terrorism legislation.
This aligns with OFAC’s public position that toll payments (and even guarantees/services for safe passage, whether or not a payment is made) are not authorised for US persons, and that non US persons can also face significant sanctions exposure, especially where conduct causes US persons (including insurers/reinsurers) to violate sanctions.
What this means for insurers
- Underwriting shifts from 'navigation risk' to 'sanctions control risk': Insurers will want clear evidence of routing controls, documented port agent instructions, and escalation procedures for any 'fee' demands.
- Claims defensibility improves, but disputes move to facts: Expect arguments about whether a charge was a legitimate service fee versus a prohibited toll, and whether the insured’s processes met 'reasonable' due diligence.
- Portfolio exposure becomes behavioural: The riskiest insureds are those with weak governance around payments, intermediaries, and documentation not just those transiting Hormuz.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
