Insurance Costs Surge Owing To Boost In Red Sea Perils

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The sinking of a coal carrier by a sea drone has boosted the risk of navigating the vital Bab el-Mandeb chokepoint to a new level and is driving a fresh surge in insurance costs.

Sank With Explosives

The British navy said that the only visible objects in the last known location of a dry-bulk carrier — at which point it was semi-submerged — were some debris and an oil slick. Yemen’s Houthi militants managed to strike it with a seaborne drone, killing one crew member and injuring others. They said they eventually sank it with explosives.

The price of covering vessels for transit — measured as a percentage of the ship’s value — surged to about 0.6% from between 0.3% and 0.4% according to two people involved in the market. It means that a vessel worth $50 million would have to pay $300,000 for one passage. The rate is nevertheless slightly below a peak reached earlier this year when attacks ramped up.

The sinking is a stark reminder of the growing threat the militants pose to vessels in the region. US and UK bombing of the Houthis, which began in January, failed to quell the attacks and instead led to vessels associated with the two nations becoming targets for the group, alongside freighters with connections to Israel. The Houthis, supporting Gazans, have warned of an expanded operation to potentially attack as far as the Mediterranean.

“It’s another indicator that the Houthis are stepping up their attacks on those vessels that were warned not to pass through the Red Sea,” Dirk Siebels, a senior analyst at Risk Intelligence, said of the sea-drone strike.

Not all ships are paying the bumper insurance premiums. Chinese vessels continue to receive significant discounts, likely because they have so far been less likely to be deliberately targeted, the people said.

Unacceptable Situation 

Last week’s barrage of attacks – and the death of a crew member – also served a reminder of the impact on the seafarers who help to keep global trade running. Almost 9% of global seaborne trade went through the Bab el-Mandeb last year, according to Clarkson Research. That figure will have dropped in 2024.

A separate attack last week saw a seafarer airlifted from another ship, the Verbena, with significant injuries after the vessel was also struck by what is thought to have been an aerial drone.

“This is an unacceptable situation, and these attacks must stop now,” 14 shipping trade groups including BIMCO said in a statement on Wednesday. “We have heard the condemnation and appreciate the words of support, but we urgently seek action to stop the unlawful attacks on these vital workers and this vital industry.”

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Source: InsuranceJournal