The cost of insuring commercial ships that sail past Yemen’s Houthi militants surged after the rebels sank two ships and killed sailors this week, underscoring how the attacks have revived risk in the crucial waterway.
Shipowners now have to pay about 1% of a ship’s value if they want to pass through the Red Sea, said Marcus Baker, global head of marine cargo and logistics at Marsh McLennan, the world’s largest insurance broker. That’s up from 0.2% to 0.3% in recent months, a period when there had been a lull in attacks.
The rapidly rising war-risk rates, which had come from lower levels during a lull in attacks in recent months, reflect underwriters’ concerns that the dangers on the route that links Europe with Asia have now returned to levels last seen about a year ago.
The rates, extra charges paid by shipowners or charterers to insurers when they decide to sail through risky areas, are likely to increase costs for the few ships that are still sailing through the Red Sea. Those that avoid the region have to add thousands of miles more on their route around Africa instead.
John Cotzias, founding partner of Greece’s Xclusiv Shipbrokers, said underwriters and shipowners have seen a similar jump from around 0.4% to about 1% now.
The militant group started targeting ships off the Yemeni coast in November 2023 in what it said was a response to Israel’s war in Gaza. Ships with associations to the US, UK or Israel or those that have been targeted by the Houthis previously now face higher costs, Baker said.
