US, UK And Israeli Firms Face 50% Rise In Red Sea Ship Insurance Rates

War underwriters have raised the premiums they charge to British, Israeli, and US firms by as high as 50% for the vessels transiting the Red Sea, and some providers are avoiding this business owing to targeting the ship by the Yemeni Houthis, sources stated. Attacks by Iran-backed Houthis since November 2023 have slowed trade between Europe and Asia and alarmed the major powers. The Houthis state that they are in solidarity with the Palestinians as the Israeli war against Hamas in Gaza grinds on.

Many firms have also opted to re-route vessels around southern Africa even though some vessels are sailing through the Red Sea. Vessels with associations with Israel, the US, and Britain are paying 25% to 50% more in terms of war risk premiums than other vessels to navigate the Red Sea, explained David Smith, head of hull and marine liabilities at the insurance broker McGill and Partners.

Two insurance industry sources mentioned that vessels with the US, the UK, or Israel links would be quoted a higher rate, even above 50%. Almost all the ships that have had issues so far have some elements of Israeli, US, or UK ownership, mentioned Marcus Baker, the global head of cargo and marine with insurance broker dubbed Marsh.

Baker mentioned that there was an “exclusionary language” being introduced for cover involving the UK, the US, and Israeli interests. Such things are being encountered, but it is not everywhere as specific markets are not putting the language on. The two sources said that some underwriters had avoided covering such businesses for now.

In one of the serious incidents, a tanker operated by a UK-based firm whose cargo was owned by the global commodities trader Trafigura was hit by a missile that resulted in a fire onboard that was put out.

COSTLY

Insurance industry sources mentioned that the war risk premiums quoted for the Red Sea voyages hovered nearly 1% of the value of a vessel in the past ten days, up from approximately 0.7% previously, with several discounts applied by the underwriters. This translates into thousands of dollars of additional costs for a seven-day journey.

The apparent safe passage that was offered by the Houthis to vessels owned or flagged by Russia and China, including Hong Kong and Iran, is mainly designed to provide a degree of assurance to commercial markets associated with those nations mentioned that Munro Anderson, the head of operations at marine war risk and insurance specialist Vessel Protect, part of the Pen Underwriting.

Vessels are adding messages to their public vessel tracking profiles suggesting that they have China’s crew members onboard or have no links to the UK, the US, or Israeli firms, shipping data reflected. Israeli container line dubbed Zim declared that it has been diverting the vessels away from the waters of the Red Sea. British maritime risk advisory and security firm Dryad Global has advised clients to avoid the region until further notice.

Corey Ranslem, the CEO of Dryad Global, has mentioned that they are surprised that US- and UK-flagged or operated vessels are transiting the Red Sea and the Gulf of Aden. They continue to represent the highest risk categories of ships for a potential attack in the region. Vessels from Iran, China, and Russia are the only operated and flagged ships that could safely transit the area. The Iran-backed Houthis will not attack vessels with those flags/associations, as both China and Russia are sympathetic to Iran.

There are rising concerns about a spillover that could hit other vessels. The threat level to vessels with Israeli, UK, and US interests stays high, as a 5 Feb advisory note issued by the significant shipping associations mentioned. However, all operators, crews, and owners should be cognisant that their vessels could be misidentified and understand the risks of collateral damage.

Reference: Reuters

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