You can't secure the world's most volatile choke point with a mandatory insurance policy. But that's exactly what Tehran is trying to do.
Major General Mohsen Rezaei, a senior adviser to Iran's Supreme Leader, went on television to propose what he called a civilian "insurance mechanism" for the Strait of Hormuz. The pitch sounds reasonable on paper. He claims Iran wants to protect the environment and cover the costs of maritime accidents. He explicitly stated that the financial burden shouldn't fall on the Iranian people, so those transporting oil must pay up.
Don't buy the benign rhetoric. This isn't about safety or environmental protection. It's a calculated legal and economic squeeze play designed to convert Iran's military dominance over the strait into a permanent, revenue-generating regulatory choke hold.
The Stealth Toll Road in the Gulf
For decades, the United States and its allies have defended the right of free transit through international straits under the United Nations Convention on the Law of the Sea (UNCLOS). Charging a direct transit fee or toll to commercial ships passing through an international waterway is a massive legal violation. It would trigger an immediate, aggressive international backlash.
Tehran's Ministry of Economic Affairs and Finance figured out a clever loophole. Instead of risking the political fallout of demanding a direct "Strait of Hormuz Toll," they're framing the charge as a mandatory administrative service.
The newly minted Persian Gulf Strait Authority (PGSA) has already begun mandating that all transiting vessels register and obtain Iran-approved insurance coverage. Right now, during a 60-day transition window tied to recent US-Iran diplomatic talks, the PGSA is offering this coverage for free. But the fine print in their terms-and-conditions document tells a different story. The PGSA explicitly reserves the right to introduce steep mandatory insurance fees as soon as that window closes.
Internal Iranian planning documents reveal the true scale of the ambition. While conventional maritime services might pull in a couple billion dollars, architects of the insurance model estimate that policies covering ship inspections, detentions, and administrative confiscations could generate upwards of $10 billion annually for Tehran.
Forcing Tankers into the Danger Zone
The scheme gets worse when you look at the physical geography of how ships are being forced to navigate the strait.
Following the brutal maritime conflict earlier this year—where commercial war-risk insurance premiums spiked an astronomical 4,000 times due to sea mines, drone strikes, and fast-attack boat raids—many shipowners shifted their routes. Tankers have been hugging the southern corridor near the coast of Oman, often relying on US military guidance and helicopter escorts to slip past Iranian reach.
Iran's new insurance regime explicitly outlaws this southern route. The PGSA terms mandate that all vessels utilize a specific northern channel near Larak Island.
[Oman Coast / Southern Corridor] <-- Where ships WANT to go (US/Allied Escorts)
vs.
[Larak Island / Northern Channel] <-- Where Iran MANDATES transit under new rules
If a captain deviates from the Iranian-designated northern path, the PGSA warns it will treat the move as a strict violation, giving them the self-appointed right to revoke passage permissions, enforce heavy penalties, or launch legal detentions. By forcing ships into their own backyard, Tehran ensures that commercial vessels are physically accessible to Iranian boarding parties.
The Reinsurance Mirage
The global marine insurance market is an incredibly tight, highly monopolized network dominated by Western clubs and institutions, mostly centered in London. They aren't going to accept or recognize a unilateral, politically charged insurance certificate issued by an Iranian state entity.
If a commercial vessel relies solely on an Iranian policy, it risks being denied entry at major international ports in Europe and Asia.
Tehran's smart governance think tanks think they have a workaround. The plan is to offer this domestic coverage as a form of mandatory reinsurance backed by Russian and Chinese firms. Under this setup, a shipowner would be forced to buy the Iranian policy as an unavoidable "add-on" to their primary global insurance policy just to get permission to enter the strait.
What Commercial Shipping Needs to Do Next
This creates an immediate, severe headache for compliance officers, legal teams, and ship operators worldwide. If you comply with Iran's mandate and pay the upcoming fees, you may be violating Western sanctions frameworks or setting a terrible precedent that legitimizes illegal maritime tolls. If you ignore it, your crew and cargo face immediate physical risk of detention when passing Larak Island.
The maritime industry cannot treat this as a standard regulatory update. Companies navigating the Middle East energy routes must immediately take three practical steps.
- Establish Dual-Route Protocols: Coordinate directly with the International Maritime Organization (IMO) and regional coalition forces to ensure that any transit utilizing the southern Omani corridor has verified, active military escort coverage that explicitly overrides PGSA administrative threats.
- Audit Sanctions Exposure: Have legal counsel evaluate whether purchasing the mandatory PGSA certificates—even during the free trial period—constitutes formal recognition of an unsanctioned maritime authority, which could complicate secondary insurance coverage in London markets.
- Prep Crews for Local Inspections: Because the new Iranian insurance policies explicitly cover "inspections and detentions" while excluding actual weapons strikes, captains must be briefed that paperwork discrepancies will be used as the primary legal pretext for Iranian boarding teams to halt and delay vessels.
Allowing Iran to succeed with this administrative overreach sets a dangerous precedent. If Tehran can successfully monetize and regulate an international chokepoint through a shell game of maritime insurance, it won't be long before other state actors try the exact same tactic in strategic waterways across the globe.
