LMA wording excludes Hormuz 'toll' payments: What this means for insurers
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.
For more on how sanctions developments affect the insurance market, see our insurance sector page.
See also our insight on the insurance impacts of the Middle East conflict.
Contents: The Word, August 2026
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- Why continuous monitoring will define AI insurance (and what it changes for insurers)
- The insurance implications of the recent personal care products chemical contamination study
- When futuristic design costs lives: Implications of Tesla’s hidden handle product recall
- Six minutes from crisis to covered: How artificial intelligence is transforming pet insurance claims
Contact
Jeanette Flowers
Claims Handler
Jeanette.Flowers@brownejacobson.com
+44 (0)330 045 2178
Tim Johnson
Partner
tim.johnson@brownejacobson.com
+44 (0)115 976 6557
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