Ship insurers seek exclusions for US, UK vessels from red sea coverage

Some ship insurers are starting to exclude US and UK merchant ships from war risk coverage in the southern Red Sea. This move follows the recent airstrikes on Yemen by these nations this past month. Houthi militants have increased attacks on commercial ships, striking two commodity carriers with missiles, though both continued their journeys.

Underwriters are now excluding vessels linked to the US, UK, and Israel in their coverage for the region, says Marcus Baker, global head of marine and cargo at Marsh. This exclusion typically refers to vessel ownership or interest.

The southern Red Sea’s security has been increasingly fragile, highlighted by recent missile attacks on the Greek-owned Zografia and the US-owned Gibraltar Eagle. Consequently, major global shipping companies, including Shell Plc and Mitsui OSK Lines Ltd., have halted transits through the region.

The scope of these insurance exclusions poses challenges, with terms like “interest” potentially encompassing a broad range of connections to a vessel. While attacks have caused damage, they have not yet prevented a ship’s journey, leading insurers to continue covering many vessels in the Bab el-Mandeb.

The industry faces evident risks, with the motive behind targeting specific vessels, like the Greek-owned carrier, remaining unclear. In some instances, ships have been mistakenly targeted.

Following the recent airstrikes, war risk insurance rates have spiked, now costing about $1 million for a $100 million vessel, a significant increase from previous rates.