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As War Risk Spikes in Red Sea, IUMI Says Cover Remains Affordable

Zografia
Missile strikes are a real concern for U.S. and UK-linked vessels in the Red Sea, like the Zografia, whose hull penetration is visible at center right (Suez Canal Authority)

Published Feb 7, 2024 10:44 PM by The Maritime Executive

After reports of surging war risk insurance rates for transits in the Red Sea, the International Union of Marine Insurers (IUMI) is emphasizing that the global marine insurance market still supports trade in the Red Sea, and at an "affordable price."

War risk cover for transits of the Red Sea has increased from about 0.01 percent of vessel value in early December to as much as 1.0 percent in recent weeks, adding hundreds of thousands of dollars onto the cost of a single voyage. The prices have been driven ever upward by persistent Houthi missile attacks on merchant shipping in the region. Several vessels have been hit and have sustained serious damage, like the bulker Zografia and the tanker Marlin Luanda, and many others have experienced near-miss incidents. Despite a series of U.S. and UK strikes on Houthi launch sites, bunkers, radars and other emplacements, the attacks have continued on a regular basis. 

The insurance hikes are largest for the vessels that are highest on the Houthi priority target list - that is, ships with links to the U.S., UK or Israel. Brokers report that vessels with ownership ties to these three nations are paying up to 50 percent more for their war risk cover in the area. And some underwriters are simply refusing to write policies for these vessels, according to Reuters. 

During its annual conference, IUMI was at pains to emphasize that cover remains available. 

"In the Red Sea, the insurance market is providing hull and cargo products at affordable prices and vessel owners are able to obtain the cover they require," IUMI said Wednesday in a statement. "The impact on Suez Canal transits and global supply chains are significant but this has not affected the ability of the marine insurance market to provide adequate cover – both for Red Sea/Suez Canal transits or for the longer route around the Cape of Good Hope."