Red Sea Insurance Costs Skyrocket Amid Rising Houthi Shipping Threats

The cost of insuring a ship through the Red Sea has more than doubled since the start of September and some underwriters are pausing cover as the risk of attack from Yemen's Houthis on commercial vessels increases, industry sources said.

The Iran-backed Houthis first launched aerial drone and missile strikes on the waterway in November. They say they are acting in solidarity with Palestinians under assault in Israel's war on Gaza. In more than 70 attacks, the Houthis have sunk two vessels, seized another and killed at least three seafarers.

The industry sources, speaking on condition of anonymity, said additional war risk premiums, paid when vessels sail through the Red Sea, were quoted up to 2% of the value of vessel from 0.7% at the start of September and after 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 said they will attack ships with links to the UK, the United States or have called at Israeli ports, although other vessels have been in the firing line, adding to dangers and also the costs involved.

"A lot of the smaller insurers are no longer prepared to underwrite Red Sea war coverage," said David Smith, head of marine with insurance broker McGill and Partners.

"It’s the first time I've seen underwriters just say no."

Insurance industry sources said there was still some cover available but the costs were rising.

"There is a lot of selection by those still willing to write ships," an underwriting source said, suggesting insurers were becoming increasingly cautious and selective. "Ships that are probable targets for attack are now struggling to find cover."

The Sounion, which was struck on Aug. 21 and laden with about one million barrels of crude oil, was towed without any oil spill, the EU naval mission said on Monday.

There have been no claims so far on the Sounion, with the vessel's value estimated at $80 million, three sources said.

They added that the war insurance policy was provided by a consortium led by underwriter Brit. The consortium of underwriters also included Antares, Iquw, Hamilton, Westfield and Aspen.

Aspen and Brit, a unit of Canadian insurer Fairfax, both declined to comment. Antares, Iquw, Hamilton and Westfield did not respond to a request for comment.

(Reuters - Editing by William Maclean)