The cost of insuring a ship through the Red Sea has more than quadrupled since the beginning of September, and some underwriters are halting coverage as the likelihood of attack by Yemen’s Houthis on commercial vessels rises, according to industry sources.
In November, the Iranian-backed Houthis initiated aerial drone and missile strikes on the waterway. They say they are acting in solidarity with Palestinians under attack in Israel’s war on Gaza. In more than 70 attacks, the Houthis have sunk two ships, taken another, and murdered at least three sailors.
According to industry sources, who spoke on the condition of anonymity, additional war risk premiums paid when vessels sail through the Red Sea were quoted at up to 2% of the vessel’s value, up from 0.7% at the beginning of September and following the attack on the Greek-operated Sounion tanker, which was on fire for weeks.
“Currently, we are seeing premiums as high as 2% on vessel value for a single Red Sea transit amid fluctuating insurer appetite,” said Louise Nevill, UK CEO, marine, cargo & logistics, with broker Marsh.
The Houthis have threatened to attack ships with links to the UK, US, or Israeli ports. However, other vessels have also been in the firing line, posing additional risks and costs.
“A lot of the smaller insurers are no longer prepared to underwrite Red Sea war coverage,” said David Smith, head of marine at insurance brokerage McGill and Partners.
“It’s the first time I’ve seen underwriters just say no.”
According to insurance industry insiders, some coverage is still available, but the costs are increasing.
“There is a lot of selection by those still willing to write ships,” an underwriting source stated, implying that insurers were growing more cautious and picky. “Ships that are probable targets for attack are now struggling to find cover.”
The EU naval mission reported that the Sounion, carrying approximately one million barrels of crude oil, was safely towed.