LONDON, Feb 7 (Reuters) – Shipping companies with links to the United States, United Kingdom, and Israel are facing soaring insurance premiums and even avoidance from some providers due to rising tensions and attacks by Yemen’s Houthi rebels in the Red Sea.
Since November 2023, Houthi missile attacks have disrupted trade between Asia and Europe, raising concerns among major powers. The Houthis claim their actions are in solidarity with Palestinians amidst the ongoing Israeli-Hamas conflict in Gaza.
While many companies have opted for longer routes around southern Africa, some vessels continue navigating the Red Sea. However, they face a hefty price tag. According to David Smith, head of hull and marine liabilities at insurance broker McGill and Partners, war risk premiums for ships linked to the US, UK, or Israel have increased by 25-50% compared to other vessels.
Industry sources reveal even higher quotes, exceeding 50%, for ships associated with these nations. “Almost all ships facing problems have some link to Israeli, US, or UK ownership,” commented Marcus Baker, global head of marine and cargo with insurance broker Marsh. He further noted the emergence of “exclusionary language” in insurance policies, specifically targeting interests related to these countries.
The situation has even led some underwriters to completely avoid covering such business. One notable incident involved a UK-operated tanker, carrying cargo owned by Trafigura, being hit by a Houthi missile, resulting in a controlled fire onboard.
The financial burden is significant. Industry sources report war risk premiums for Red Sea voyages have spiked to around 1% of a ship’s value, compared to the previous average of 0.7%. With discounts factored in, this translates to hundreds of thousands of dollars for a single week-long journey.
This scenario presents an opportunity for other nations. “The apparent safe passage offered by Houthis to vessels flagged or owned by Russia, China (including Hong Kong), and Iran aims to attract commercial interests from these countries,” explained Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect.
Ships are even resorting to manipulating public tracking data, displaying messages claiming Chinese crew onboard or no links to US, UK, or Israeli entities. Israeli container line Zim has confirmed diverting its vessels away from the Red Sea.
Maritime security experts like Dryad Global advise complete avoidance of the region until further notice. “US and UK-flagged or operated ships are the highest risk category for potential attacks,” warned Dryad Global CEO Corey Ranslem. “Only Iranian, Russian, and Chinese vessels can potentially transit safely due to their ties with Iran, a Houthi ally.”
Concerns regarding collateral damage and broader conflict escalation are growing. Major shipping associations issued an advisory on February 5th, highlighting the ongoing high threat level for ships linked to the US, UK, and Israel. The advisory urged “owners, operators, and crews to remain aware of the risk of misidentification and potential collateral damage.”
With tensions simmering and attacks continuing, the Red Sea remains a perilous passage for many, particularly those tied to specific nations. The financial and security implications underscore the complex geopolitical landscape impacting global trade routes.