How Red Sea attacks impact a broker in New Zealand

More claim delays and rising costs for clients

How Red Sea attacks impact a broker in New Zealand


By Daniel Wood

Houthi rebels in Yemen continue their attacks on shipping in the Red Sea. News reports say missiles – some launched from drones – are being used in strikes that have targeted Israeli, British and American vessels.

This week, the British Chambers of Commerce (BCC) released data showing that more than half of UK exporters say they have been impacted by the shipping disruption caused by these attacks. 

What about the effects in New Zealand?

O’Connor Warren Insurance Brokers focuses on risk advice and coverages in the transport and logistics sectors. Insurance Business asked director Isaac Mutu (pictured above), how the Red Sea attacks are impacting his clients?

“I know that it would be fairly straightforward to draw a line between the impact of what’s happening there [in the Red Sea] and those bad delays in things getting down to New Zealand,” said Mutu.

How war can impact the claims process

The broker said this is causing claim delays for some clients waiting for motor parts.

“If you consider brands like Volvo, Scania, Kenworth and similar brands out of Europe and the United States - New Zealand, and to a certain extent Australia, have never been countries that hold significant volumes of those parts,” said Mutu.

The Red Sea, Ukraine and Middle East conflagrations are all disrupting supply chains, he said.

“With those delays to those parts arriving, the consequential financial impact on a lot of these transport companies is acute because for every day that a truck is off the road there is a quantifiable financial loss attached to it,” said the broker.

Mutu said this adds to claim delays that are still impacted by the long COVID-19 hangover.

“Ever since COVID - when we lost a big chunk of our freight capacity which has never come back – the sustained time delays for serious claims where you’re not involved in a write off have never disappeared,” he said.

Mutu said one of his biggest current insurance challenges is a slow claims process because of these “sustained delays.”

“In the transport industry, insurance is not really concerned with the financial loss associated with the amount of time a claim takes to pay,” he said. “Though that is probably one of the biggest challenges we’ve faced over the last few years.”

Delays in the insurance process, said Mutu, are not usually covered by insurance.

“Parts of insurance can respond to some of those losses on a really limited basis but insurance isn’t really designed to account for the delay in something being repaired,” he said.

War exclusions: “Just as a reminder guys!”

One other result of the escalation of global conflicts, said Mutu, is some insurers are making sure they explicitly point out war exclusions to brokers.

“They [war exclusions] were always there but what we’ve noticed recently is that they have been brought to the top of the table and insurers are making sure it’s front of mind for brokers,” said Mutu. “Just as a reminder guys!”

He said war exclusions have impacted his clients.

“We ran into that issue 12 months ago with exporters looking to move produce and food into conflict zones, like Ukraine,” said Mutu. “Do you think any prudent insurer in their right mind would insure conveyances into Ukraine? Absolutely not.”

According to a Bloomberg report, insurers are seeking exclusions for vessels with links to the US, UK, and Israel that are travelling through the Red Sea. 

“Underwriters are adding clauses saying no US, UK, or Israeli involvement,” said Marcus Baker, global head of marine and cargo at Marsh. “Just about everybody is putting something like that in, and many include the words ‘ownership’ or ‘interest’.”

The report said insurance exclusions, because of their breadth, risk creating problems.

While ownership is a relatively straightforward term, “interest” can be interpreted more widely, Baker said. He said the exclusions could span “more tangential factors” like charterers or previous port visits.

Impacts on UK exporters

The main impacts of the Red Sea conflict on the UK’s exporters, according to the BCC survey, are increased costs and delays. The report said some firms are reporting price rises of 300% for container hire and logistical delays are adding up to four weeks to delivery times.

Are you an insurance professional? Is the escalation of geopolitical conflict impacting your clients? Please tell how us below.

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