LONDON, 18 December – The London marine insurance market has extended the area of the Red Sea it considers to be high risk following a surge in attacks on commercial vessels, according to a statement released on Monday.
Guidance from the Joint War Committee (JWC), which comprises syndicate members of the Lloyd’s Market Association (LMA) and representatives of the London underwriting market, is closely monitored and influences underwriters’ premium considerations.
The JWC has extended the high-risk zone in the Red Sea from 15 degrees north to 18 degrees north, the statement said.
“In many ways it’s more a reflection of the missile range than anything else,” said Neil Roberts, head of marine and aviation at the LMA, which represents the interests of all Lloyd’s underwriting businesses.
“But it’s a wake-up call for insurers rather than owners, who are very aware of the risks, as evidenced by the number of ships being diverted,” Roberts told Reuters.
Iran-backed Houthi militants in Yemen have stepped up attacks on ships in the Red Sea in a show of support for the Palestinian Islamist group Hamas following the start of Israel’s military campaign in Gaza.
As well as attempting to seize ships, the Houthis have fired rockets at vessels sailing past the Yemeni coast towards the critical Bab al-Mandab gateway, prompting some shipping companies to re-route vessels via the Cape of Good Hope.
Ships must notify their insurers when sailing through such areas and pay an additional premium, usually for a seven-day period of cover.
The cost of shipping goods through the Red Sea has risen in recent days.
War risk premiums have risen to around 0.5 to 0.7 per cent of a ship’s value from 0.07 per cent in early December, according to market estimates on Monday.
While various discounts would be applied, this would still add tens of thousands of dollars to the cost of a seven-day voyage.
The extension of waters considered high risk is a “welcome addition”, said Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect, part of Pen Underwriting. “Commercial operators will now have some reassurance that there is consistency of cover throughout the risk area.”
The JWC also slightly changed the high-risk zone near Eritrea from 15 degrees north to 18 degrees north, the statement said.
“They could face contingent problems from missiles. It’s a fluid situation and unpredictable and it’s best we keep that in people’s minds,” the LMA’s Roberts said, referring to the waters near Eritrea.
There were also fears that Somali gangs were trying to disrupt shipping after European naval officials said a merchant ship, the Ruen, may have been hijacked last week.
“Before the MV Ruen, insurers were keen to tighten up the Indian Ocean area closer to the Somali coast,” said Roberts. “Events show that insurers still need to be vigilant and insureds need clarity. So the area to the south and east was left unchanged.”
The JWC normally meets quarterly to review areas it considers to be high risk for merchant vessels and prone to war, strike, terrorism and related perils.
