Red Sea war risk premiums soar

War risk insurance premiums for vessels travelling via the Red Sea and Gulf of Aden have jumped this week after a spate of attacks on commercial vessels from Houthi controlled territories in Yemen.

Houthi rebels have attacked vessels suspected of being linked to Israel as they transit through the Red Sea. These attacks prompted the London market's Joint War Committee to extend the territory constituting the Red Sea war risk on 18 December to account for missile range. The revised territory allowed underwriters to adjust insurance terms, driving up premiums to around 0.5-0.7pc of hull value from around 0.1pc in early December, according to market participants.

Attacks on vessels in the Red Sea, Bab el-Mandeb Strait, and Gulf of Aden are ongoing. The US Central Command said a one-way attack drone and an anti-ship ballistic missile were launched against the Swan Atlantic from Yemen on 18 December. The UK Maritime Trade Operations (UKMTO) reported multiple suspicious incidents on 19 December.

Several vessels have rerouted from travelling via the Suez Canal which leads into the Red Sea, with some very large gas carriers choosing to voyage around the Cape of Good Hope to avoid the threat. Some firms and owners have placed a blanket ban on vessels voyaging through the area. This has pushed up freight costs either on war premiums or longer voyages.

Targeted vessels are supposedly Israeli-linked or involved in the Saudi-led alliance with the Yemeni government, but vessels targeted in recent attacks had no clear affiliation with them, according to a coalition of maritime organisations including the International Chamber of Shipping and Bimco.

The first attack took place on 19 November when Houthi rebels seized the Galaxy Leader with its last known location near the Port of Salif, Yemen, according to vessel tracking data. The UKMTO has since reported around 40 threatening or suspicious events in the region.

In response, international maritime coalition Operation Prosperity Guardian has been launched by the US, the UK, Bahrain, Canada, France, Italy, the Netherlands, Norway, the Seychelles and Spain to ensure security in the region and a return to stable trade. The UK Royal Navy recently assigned the HMS Diamond, equipped with the Sea Viper anti-air missile system, to the international naval force to assist with air defence.

By Leonard Fisher-Matthews