LONDON (Reuters) – War risk insurance premiums for shipments through the Red Sea are rising after further attacks on commercial ships by Yemen’s Houthi movement, insurance industry sources said on Tuesday, anticipating that ships with British or American connections would be targeted.
The Iran-aligned Houthis, well equipped and trained, have launched multiple attacks on ships in the Red Sea since November. A Houthi official said on Monday that they would expand their targets to include American ships.
Even before the recent Houthi attacks, the London insurance market listed the southern Red Sea among high-risk areas, and ships must notify their insurers when sailing through these areas and pay an additional premium, which until earlier this month was usually for seven months. Daily coverage period.
Insurance industry sources said war risk insurance premiums rose to about 1% of the ship’s value, from about 0.7% last week with various discounts applied by insurance companies. They added that interest rates are expected to rise.
This translates to hundreds of thousands of dollars in additional costs for a seven-day trip.
The terms given for war risk quotes are now much shorter, “with 24 hours becoming the norm,” said Monroe Anderson, chief operating officer at marine war risk and insurance specialist Vessel Protect, which is part of Pen Underwring.
“The rates are increasing, which reflects the large and ambiguous exposure to risks in the Red Sea,” he told Reuters.
“Since the naval and air strikes in Yemen, it is now widely believed that in addition to ships associated with Israel, there is an increased threat to ships associated with the United Kingdom and the United States, including their flags, as well as those associated with Australia.” The Netherlands, Bahrain and Canada,” referring to the US-led maritime coalition that is trying to protect commercial shipping.
US-based Eagle Bulk Shipping said on Monday that one of its ships was hit by an “unidentified projectile” while sailing 100 miles (160 km) off the Gulf of Aden.
A source in the insurance sector said: “The Houthi attacks include all ships with less clear criteria.” “We now advise US and UK flags not to pass through the Red Sea.”
The armed Houthi group, which controls the most populated areas of Yemen after nearly a decade of war against the Western-backed coalition led by Saudi Arabia, has emerged as a strong supporter of the Palestinian Islamist movement Hamas in the latter’s war against Israel.
In recent days, commercial ships have suspended their trips through the Red Sea, with more ships making the longer journey through the Cape region in southern Africa.
“As tensions escalate in the Red Sea, the cost of transporting goods globally will increase and will inevitably be passed on to the end consumer,” said Nicole Hudson, Director of Supply Chain Platform e2open.
Shipping sources said that higher insurance rates and higher fees for using the Suez Canal mean that taking the longer route has become less expensive, which may also mean less certainty about delivery dates.
“Shipowners and charterers may find it more cost-effective to change course around Africa than incurring the combined costs of Suez Canal transit fees and insurance premiums,” Clarksons Securities said in a note this week.
The Yemeni vice president said on Tuesday that the US-led coalition is weak because regional powers Saudi Arabia, the United Arab Emirates and Egypt have not participated.
“If the US-led coalition fails to thwart further attacks and ensure freedom of navigation in the region, we expect war insurance coverage to become unavailable, forcing most traffic to use the much longer route around the Cape of Good Hope.” “Morningstar ratings service DBRS said in a note on Monday.
(Reporting by Jonathan Saul, Editing by Susan Fenton)
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