War risk insurance premiums for ships transiting the Red Sea are witnessing a notable increase following recent attacks by Yemen’s Houthi movement on merchant vessels and heightened expectations that vessels with UK or US connections could be targeted, according to insurance sources on Tuesday.
The Iran-aligned Houthi forces, known for their advanced capabilities, have been responsible for multiple attacks on ships in the Red Sea since November. A Houthi official indicated on Monday that their targets would expand to include US ships.
Even prior to these recent attacks, the London insurance market had designated the southern Red Sea as a high-risk area. Ships navigating through such areas are required to inform their insurers and pay an additional premium, typically covering a seven-day period, until earlier this month.
Insurance industry sources revealed that war risk premiums have surged to approximately 1% of a ship’s value, up from around 0.7% just last week, with various discounts applied by underwriters. It is anticipated that rates will continue to rise.
This increase translates into hundreds of thousands of additional dollars in costs for a seven-day voyage. Additionally, the terms offered for war risk quotes have become notably shorter, with “24 hours being the norm,” according to Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect, which is part of Pen Underwriting.
Anderson emphasized that the rising rates reflect the significant and opaque risk exposure within the Red Sea. The evolving situation has prompted a reevaluation of insurance terms and premiums to address the escalating risks faced by vessels in the region.
