Ship insurance companies have been hiking premiums by as much as 50 percent for US, UK, and Israeli firms sailing through the Red Sea due to the increased risks associated with those vessels in that region.
Some providers are avoiding that business due to Houthi targeting.
The increased ship insurance premiums and avoidance of business traveling through the Red Sea has to do with the chance that certain vessels could be targeted by Houthis from Yemen, according to sources cited in a Reuters report.
There has been a notable slowing in trade between Europe and Asia due to the attacks that have been made by the Houthis since November. Major world powers have been concerned by this trend, particularly considering the alignment between the Houthis and Iran. According to the Houthis, their actions are a statement of solidarity with Palestinians as the war between Israel and Hamas militants in Gaza continues.
Cheaper ship insurance along a much longer route
Several companies have chosen to avoid the Red Sea and take a considerably longer route around Africa. That said, there remain some companies that have chosen to continue sailing their routes through the Red Sea.
Vessels with a connection to the United States, the United Kingdom, or Israel that continue to sail the Red Sea are now paying about 25 percent to 50 percent more for their coverage due to war risk than other ships traveling the same waters, said head of hull and marine liabilities David Smith from McGill and Partners.
Paying more than 50 percent higher
Two sources who have industry knowledge were cited in the Reuters report and stated that vessels connected with the US, UK or Israel could even end up paying over 50 percent more for war risk coverage on their ship insurance.
“The ships that have so far had problems, almost all of them have got some element of Israeli or U.S. or UK ownership in there somewhere,” explained broker Marsh global head of marine and cargo Marcus Baker.
According to Baker, there is “exclusionary language” being written for coverage of vessels linked with those nations.
“We are seeing this, but it’s not everywhere because there are certainly markets out there that are not putting that language on,” said Baker.
Some ship insurance underwriters are avoiding selling coverage
The Reuter’s report’s two industry sources indicated that there are some insurers that are skipping covering businesses with that risk for the moment.
