News / Ocean premiums rocket as insurers back away from Red Sea risk

Photo: © Roman Motizov | Dreamstime.com

In addition to soaring ocean rates and shipment delays from the Red Sea crisis, exporters and importers are grappling with another major trade challenge: insurance cover. 

According to industry sources, most insurance companies are no longer willing to cover cargo sent on voyages transiting the Red Sea route, as they want to ward off the risk of high-value claims from cargo owners. 

Sources also noted that insurers have even pulled back policies already in place for shipments passing through high-risk areas, as both parties typically have an option to undo existing cover with a 30-day notice. 

“We have advised our clients with cargo in transit to secure themselves with coverage top-ups on payment of additional war-risk premiums,” said one insurance company official. 

Pushpank Kaushik, CEO of Singapore-based NVO and ship agent Jassper Shipping, told The Loadstar that the Red Sea crisis was posing widespread marine liability insurance issues for the industry. 

“The situation is very unstable and it’s hard to estimate premiums,” he said. “This cost escalation, coupled with the unpredictable nature of future attacks, has created a scenario where offering coverage involves a huge risk for insurers of gambling with millions.” 

And Carolina Klint, COO for Europe at New York-based insurance provider Marsh McLennan, this morning also brought this industry pain point to the fore in a webinar.

“It is becoming increasingly difficult to find an insurer willing to risk it [Red Sea trade],” said Ms Klint, adding: “It is almost impossible to transit ships through the Suez Canal without risking lives.”

Sunil Vaswani, executive director of the Container Shipping Lines Association in India, said: “Some insurance companies are reportedly reluctant to underwrite goods that would be shipped through the Red Sea because of the heightened risk perception. This is another trade pressure for exporters/importers.” 

The crisis has also boosted insurance premiums for shippers even on re-routed sailings, in the wake of longer voyages and other risk considerations, said sources.

Industry observers believe the hardships are hitting reefer shippers harder, as they generally bet on faster, safer ocean connections, given the perishable and time-sensitive nature of their cargo.  For example, there is considerable jeopardy for Indian grape growers that have just moved into their harvest season with greater demand hopes.

Meanwhile, strange as it may sound, CMA CGM (India) has issued an advisory that, “in view of the current unrest in the Middle East, shipper-owned containers having the five prefixes ZCLU, ZCSU, ZIMU, ZMOU and ZWFU will not be accepted.”