Additional war risk premium (AWRP) rates in the Red Sea have risen after the Yemen-based militant Houthis attacked Israel at the weekend, an insurance broker told Argus.
The Red Sea AWRP inched up to 0.65-0.75pc of hull and machinery value, from around 0.6pc — although 25–50pc of this may be refunded as a no-claims bonus, the broker said.
Some insurers may still offer around 0.6pc, according to brokers, but such offers are increasingly rare.
Yemen's Iran-backed Houthi militants launched missiles at Israel on Saturday, 28 March, in their first attack since the war in the Mideast Gulf began.
A source familiar with regional AWRPs told Argus today that the Houthis "have been fundamentally weakened," and "do not have the capability they had two years ago".
"But the Houthis are resilient and will probably attempt to strike a vessel," the source said. "Their threat is capped, however, given the US has so much firepower in the region."
The Houthis may attempt to charge vessel operators for safe transit, the source said, "having done this previously and in a similar way to Iran".
Red Sea rates remain below the Mideast Gulf level, where AWRP is around 1pc of hull and machinery value for a vessel stuck west of Hormuz, insurers told Argus. The rate to leave the Gulf is considerably higher.
Hormuz passage becomes significantly more expensive
For vessels passing the strait of Hormuz, AWRP is around 5.0–7.5pc of hull and machinery value and can reach as high as 10pc, according to brokers.
In addition, and before obtaining AWRP coverage, shipowners must confirm to insurers they have no links to the US or Israel and must present approval granted by Iranian authorities.
Cargo war risk premiums are also substantial, at around 10–20pc of a cargo's value, insurance brokers said.
Based on these rates, the AWRP payment could amount to as much as $13.4mn for a five-year-old very large crude carrier (VLCC) valued at around $134mn, according to shipbroker Xclusiv. Any deal would also require cargo insurance, which for a full 300,000t cargo of Dubai crude would add $52mn, implying a combined war risk insurance bill of about $65mn — comparable to the price of a 10-year-old Aframax tanker, which is around $61.5mn, according to Xclusiv.
