Reuters: Red Sea insurance costs rise as Houthi threats to shipping grow

The cost of insuring a ship transiting the Red Sea has more than doubled since the start of September and some insurers are temporarily suspending coverage as the likelihood of Houthi attacks on commercial vessels increases, shipping industry sources said.

The Iran-backed Houthis first launched drone and missile strikes on the waterway in November. They say they are doing so in solidarity with Palestinians under attack in Israel’s war on Gaza. In more than 70 attacks, the Houthis have sunk two ships, seized another and killed at least three sailors.

Industry sources, speaking on condition of anonymity, said war risk premiums paid when ships sail through the Red Sea had risen by up to 2 percent of a ship's value from 0.7 percent at the start of September after the attack on the Greek oil tanker Sunion, which burned for weeks.

“We are currently seeing premiums of up to 2% on the value of vessels for a single Red Sea transit as insurers’ appetites fluctuate,” said Louise Neville, UK chief executive of marine services at Marsh.

The Houthis say they will attack ships with links to the UK and US or that call at Israeli ports, although there are other ships in the firing line, increasing the risks and costs involved.

“Many smaller insurers are no longer willing to underwrite Red Sea war cover,” said David Smith, head of marine and marine liabilities at insurance firm McGill & Partners.

“This is the first time I've seen insurance companies say no,” he added.

Insurance industry sources said there was still some cover available but costs were rising.

“There is a lot of choice by those who are still willing to insure ships,” said an insurance company source, noting that insurers are becoming increasingly cautious and selective.

“Vessels that are potential targets of attack are now struggling to find insurance coverage,” he added.

The European Union naval mission said on Monday that the tanker Sunion, which was targeted on August 21 and was carrying about 1 million barrels of crude oil, had been towed away without any oil spill.

Three sources said there were no claims yet on the Sunion, which is valued at about $80 million.

The war insurance policy was provided by a consortium led by Brit, the sources added. The consortium also included Antares, IQUW, Hamilton, Westfield and Aspen.

Aspen and Britt, a unit of Canadian insurer Fairfax, declined to comment. Antares, IQUW, Hamilton and Westfield did not respond to requests for comment.

Source: Reuters