Ship, cargo insurers reluctant to cover Red Sea transit until ground level threat near-zero

Many insurance companies are still reluctant to provide cover for ships and cargoes transiting the Red Sea unless the ground level threat comes down to near-zero amid prolonged safety concerns, said a chartering executive in the UK whose company has decided not to move shipment via the Suez Canal, for now, on Jan. 21.
He said there are many end receivers of cargoes in Europe, who are not willing to get their shipments via the Red Sea.
Cargoes are covered separately for insurance and unless both insurers are on the same page, Red Sea transit becomes difficult, sources said.
The latest sentiment shared by insurers came to light as Yemen’s Houthi militants announced a major pullout from attacks against shipping in the Red Sea, saying they will now only target vessels with strong links to Israel following the Gaza ceasefire deal between Israel and Hamas.
Ships heading for Israeli ports, even those partially owned by Israeli individuals or entities and managed or operated by them, are exempt from attacks as of Jan. 19, according to a statement from the Houthis.
Attacks on wholly-owned or Israeli-flagged ships in the Red Sea, Bab al-Mandab Strait, the Gulf of Aden, the Arabian Sea, and the Indian Ocean will only be stopped once all the phases of the Israel-Hamas ceasefire agreement have been implemented, which are expected to take at least six weeks from their commencement Jan. 19, and possibly years.
A spokesperson for Japan’s Mitsui O.S.K. Lines, among the world’s largest ship operators, said Jan. 21 that it will consider resuming sailing in the Red Sea only after confirming the safety for sailors, cargoes and ships after having suspended its navigation in the waterway in January 2024.
“We have not changed our policy for the sailing [in the Red Sea] to date based on available information,” said the spokesperson, referring to Houthis’ announced major pullout from attacks against shipping in the Red Sea. “We are closely monitoring the safety and other situations in the Red Sea.”
A NYK Line spokesperson also said Jan. 21 that the company is still closely monitoring situations regarding the resumption of the Red Sea sailing.
High risk
The Red Sea region continues to be categorized as a high-risk area by the Joint War Committee of Lloyd’s, which provides guidelines to maritime insurers for setting their respective premium values.
Oil transits via the Bab al-Mandab Strait at the southern end of the Red Sea fell to 2.5 million b/d in 2024 from 6.9 million b/d in 2023, while those via the Suez Canal — which connects the Red Sea and the Mediterranean — dropped to 3.9 million b/d from 7.9 million b/d, according to S&P Global Commodities at Sea(opens in a new tab).
LNG ship transit via the Red Sea and through the Suez Canal has been halted for more than a year due to the escalation of attacks on merchant ships.
The gasoil and jet fuel movement from the Persian Gulf and West Coast India to Europe is set to get cheaper over the next few days, market participants in tanker freight said. The change in route to the Suez Canal, instead of the Cape of Good Hope will be gradual, even the reduction in the AWRP will be slow but the change in sentiment is already visible, said a clean tankers’ broker in Dubai.
A chartering executive in Singapore said that the clean tankers’ freight on the Persian Gulf-Europe routes will decline by at least 10% in the near term.
The sailing time for LR tankers will reduce by up to two weeks due to the switch back to the Suez Canal and despite the increase in Canal fees in recent years, the overall transportation cost will still be lower due to the lesser consumption of the bunker fuel, shipping executives said.
The Long Range II, or LR2 freight on the Persian Gulf-UKC route was assessed $225,000 lower day on day at $4.1 million via the Cape of Good Hope Jan. 21, according to the S&P Global Commodity Insights data. The route via Suez Canal enjoys a $200,000 discount over this freight, the same data showed.
Source: Platts