Houthi attacks on commercial ships in the Red Sea have caused a sharp rise in the prices of marine shipping insurance contracts, with fees being imposed to cover risks associated with conflicts, in addition to a significant increase in the cost of shipping as a result of taking a longer alternative route.
Since November 19, the Houthis have been carrying out attacks on commercial ships linked to Israel or heading to its ports in support of the Gaza Strip, against which Israel has been waging a devastating war since October 7.
According to the International Monetary Fund, shipping containers through the Red Sea decreased by approximately 30% within one year. Before the Israeli war, between 12 and 15% of global trade transited through the region, according to European Union figures.
Three types of insurance are required for commercial ships: insurance on the ship’s hull, that is, against damage that may befall it, insurance on its cargo, and finally “protection and compensation” insurance, which includes unlimited coverage for damage that may be caused to other parties. However, the cost of insuring ships and cargo against risks related to conflicts “has risen significantly” in light of the existing conditions in the Red Sea region, according to Frédéric Donville, General Manager of the Garex Group, which specializes in insurance against risks related to conflicts, who confirmed that this happened in a way that is “proportionate to “Threats.”
Claire Amonic, General Manager of Ascoma International Insurance Company, indicated that insurance rates “have increased to between 5 and 10 times, whether to insure ships or goods crossing the Red Sea.” According to Agence France-Presse, the current rate of insurance fees related to conflict risks ranges between 0.6 and 1% of the ship’s value, which constitutes huge sums, as commercial ships that cross the Red Sea, a strategic waterway, are huge container carriers or oil tankers whose value is often estimated. More than one hundred million euros. The nationalities of the companies owning or operating the ships are also taken into account.
In addition to ships linked to Israel and heading to its ports, the Houthis began targeting American and British ships, considering that they have become “legitimate targets” since Washington and London launched joint strikes on Houthi sites inside Yemen several times since January 12.
