Red Sea Insurance Costs Surge for US, UK, and Israeli Ships
War Risk Premiums Soar for Red Sea Shipping Routes
War underwriters have increased premiums for U.S., British, and Israeli firms by as much as 50% for ships passing through the Red Sea due to the targeting of vessels by Yemen’s Houthis, sources revealed. This rise in premiums has led to some providers avoiding this business altogether. Attacks by the Iran-aligned Houthis have not only disrupted trade between Asia and Europe but have also raised concerns among major powers. The situation has prompted many companies to seek alternative shipping routes, while others have opted to continue sailing through the Red Sea despite the increased risks.
Increase in War Risk Premiums
Ships with links to the U.S., Britain, or Israel are now facing much higher war risk premiums – an additional 25-50% compared to other ships navigating the Red Sea, according to David Smith, head of hull and marine liabilities at insurance broker McGill and Partners. In some cases, this rate could even exceed 50% for ships with U.S., UK, or Israeli connections, as highlighted by insurance industry sources. Exclusionary language is also being introduced for cover involving UK, U.S., and Israeli interests, although some markets are not imposing such restrictions.
Influence on Shipping Patterns
Several underwriters are currently avoiding covering this business, prompting some ships to reroute or take other precautions. A recent incident involving a UK-based company’s tanker, carrying cargo owned by global commodities trader Trafigura, that was hit by a missile has further escalated concerns. The apparent safe passage offered by Houthis to vessels flagged or owned by Russia, China, and Iran has created a visible impact on shipping patterns in the region, with ships adding messages to their public ship tracking profiles to mitigate risks.
Industry Concerns and Shifting Alliances
Shipping associations have issued advisory notes warning of the high threat level to ships with Israeli, UK, and U.S. interests. However, they also emphasize the risk of misidentification and potential collateral damage to all vessels. As the situation continues to evolve, Israeli container line Zim has diverted vessels away from the Red Sea, and maritime risk advisory company Dryad Global has advised clients to avoid the region until further notice. Moreover, there are growing concerns of a potential spillover that could impact other ships, as the risk level remains high for vessels linked to Israel, the United Kingdom, and the United States.
Conclusion
As the conflict in the region persists, the impact on shipping and the associated costs are significant. The potential for further escalations and their implications on global trade are likely to influence shipping patterns and insurance premiums for the foreseeable future.
