Red Sea insurance rates to stay firm amid US-Houthi clashes

The cost of shipping goods through the Red Sea is expected to remain firm after the United States carried out further airstrikes on Yemen on Monday, adding to fears of new attacks on ships by the Iran-aligned Houthis targeted by Washington, industry sources said.

Responding to the Houthi movement’s threats to international shipping, the US launched airstrikes on Saturday. On Monday, the Red Sea port city of Hodeidah and Al Jawf governorate north of the capital Sanaa were targeted, the Houthis’ Al Masirah TV said.

In January, the Houthis said they would halt attacks on US and UK linked shipping in tandem with a ceasefire between Israel and Palestinian Islamist group Hamas.

War risk premiums briefly eased to around 0.5 percent of the value of a ship after the January announcement from over 0.7 percent in December, before moving higher in February to 0.7 percent for some voyage rates. For some US and UK linked ships, rates were quoted up to 2 percent in recent weeks for those still willing to sail through the waterway, industry sources said.

While various discounts would be applied, this still translates into hundreds of thousands of dollars of additional costs for a seven-day voyage.

Rates were likely to stay at firmer levels and may rise in coming days, industry sources said on Monday.

Following the US military action, there was a “significant uptick in the threat profile against commercial maritime traffic within the Red Sea”, said Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect – part of Pen Underwriting.

“Specifically, the threat profile is considered critical for all vessels owned and operated by Israel as well as all vessels owned and operated by US entities.”

The Houthis have carried out more than 100 attacks on ships since November 2023 and sunk two vessels, seized another and killed at least four seafarers. They say they were acting in solidarity with Gaza’s Palestinians after Israel’s war on Gaza that began in late 2023.

Houthi leader Abdul Malik al-Houthi said on Sunday his militants would target US ships in the Red Sea as long as the US continues its attacks on Yemen.

“As soon as a missile gets fired off at a passing ship, I would be pressing to get back to higher rates,” another insurance market source said.

The Houthis, who have taken control of most of Yemen over the past decade, said last week they would resume attacks on Israeli ships passing through the Red Sea if Israel did not lift a block on aid entering Gaza.

“This intermediate period is very risky for us as we don’t have a clear view of what to expect,” a maritime security source said. 

(Reuters)