WAR AND MARINE INSURANCE - What you need to Know

This year has seen a significant increase in global conflicts, notably the war between Russia and Ukraine and ongoing tensions in the Middle East. While the human toll and geopolitical implications are often discussed, one critical aspect that is frequently overlooked is the impact on marine insurance for cargo containers. These international conflicts have exacerbated risks that insurance companies face in covering freight in these specific geolocations, resulting in rising prices and the complete withdrawal of coverage in certain transit areas.?

Many companies that previously covered ships navigating the Red Sea and other high-risk zones have now ceased to do so. Before October 2023, Red Sea premiums stood at a modest 0.07%. However, post-conflict, companies seeking coverage for cargo in the region are now facing premiums ranging from 0.5% to 0.7%. Additionally, Israeli ships chartering the Red Sea are experiencing rates ten times the average due to their increased likelihood of being targeted. This issue extends beyond the Red Sea, with similar premium hikes in the Black Sea, where ships exporting Ukrainian goods are under threat from Russia.?

In response to these challenges, seven major shipping companies have altered their trade routes to avoid these high-risk areas, opting instead to sail around the Cape of Good Hope in South Africa. This adjustment is a strategic move to manage the new prices and heightened risks to their fleets. As these conflicts and other political issues continue to evolve, it will be interesting to see how they further impact marine insurance rates and the availability of coverage for cargo in high-risk areas.?