Insurers may raise rates to cover merchant ships passing through the Red Sea after a series of attacks on vessels around Saudi Arabian waters.
The threat of further attacks on ships carrying oil and commodities is growing following the outgoing Trump administration’s move to designate Yemen’s Iran-aligned Houthi movement as a foreign terrorist group, according to a Reuters report.
“We are seeing increased rates for vessels making port calls in the Red Sea due to concerns over risk of attack by militia groups, whereas previously this was an issue of more concern in the Arabian Gulf,” Gallagher’s Mike Ingham told Reuters. “This will be impacting vessels traveling to Red Sea ports such as Jeddah.”
Ships need annual war-risk cover, as well as an additional “breach” premium when entering high-risk areas, Reuters reported. These rates are calculated according to the value of the ship for a seven-day period.
Breach rates have risen to around 0.015% of insurance costs from about 0.012% last month – adding tens of thousands of dollars for a seven-day voyage.
“The real debate is on the Red Sea side, after the incidents involving explosive devices,” a war underwriter told Reuters. “Everyone is watching what happens next.”
Last month, a tanker anchored at Jeddah port was attacked by a boat loaded with explosive. Another tanker was damaged by an explosion at a different Saudi terminal on the Red Sea in an earlier incident. Last week, the US Maritime Administration warned mariners that “heightened military activity and increased political tensions in this region continue to pose serious threats to commercial vessels.”
The Red Sea, with its connection to the Suez Canal, is one of the world’s busiest shipping lanes.