(Reuters) – Insurers will increase costs to cover merchant ships through the Red Sea after a series of incidents that have affected ships around Saudi Arabian waters, industry sources say.
The possibility of further attacks on commercial shipping transporting oil and raw materials through these waterways is growing following the departure of the outgoing US government to designate Yemen's Iran-adapted Houthi movement as a foreign terrorist organization.
“We are seeing increased prices for ships calling at the Red Sea. due to concerns about the risk of attacks from militia groups, while this was previously a problem with more concerns in the Arabian Gulf, says Mike Ingham with insurance broker Arthur J. Gallagher & Co. "This will affect ships traveling to Red Sea ports such as Jeddah.
Each ship needs different forms of insurance, including annual war risk coverage and an extra "crime" premium when entering high-risk areas. These separate premiums are calculated on the basis of the value of the vessel or hull over a seven-day period.
The crime rate has crossed up to about 0.01
“The real debate is on the Red Sea side after the incidents with explosive devices. Everyone is watching what happens next, said a war insurer.
Saudi Arabia said last month that a tanker anchored at the port of Jeddah was hit by an explosive-laden boat in what it called a terrorist attack. This was followed by a separate incident at another Saudi terminal on the Red Sea where a tanker was damaged by an explosion.
The US Maritime Administration warned sailors last week that "increased military activity and political tensions in this region continue to pose serious threats to commercial ships."
The Red Sea is one of the world's busiest shipping lanes leading up to the Suez Canal, with thousands of passages annually through the Bab al-Mandab waterway at its southern tip.
There are wider tensions following Iran's seizure of a South Korean tanker further afield in the Strait of Hormuz. Catalog