In recent months, a series of incidents around Saudi Arabian waters have forced some ship insurers to raise their rates. Merchant ships traversing the Red Sea have seen a spate of attacks that are complicating and endangering international shipping. The incidents are linked to the geopolitical instability of the region, which is the ongoing crisis in Yemen. One of the last actions of former President Donald Trump was to designate the Houthi movement as a foreign terrorist organization. The Houthis are principal players in the Yemen conflict, and they are aligned with Iran. Recently, high-profile incidents such as a tanker anchored at Jeddah's port being hit with an explosive-laden boat and the Iranian seizure of a South Korean tanker in the Strait of Hormuz have gotten everybody on edge. This could thus result in a significant increase in prices, ranging from basic commodities to oil.

“We are seeing increased rates for vessels making port calls in the Red Sea due to concerns over risk of attack by militia groups, whereas previously this was of an issue of more concern in the Arabian Gulf. This will be impacting vessels traveling to Red Sea ports such as Jeddah,” stated Gallagher's Mike Ingham.

All ships require various types of insurance when entering high-risk locations, such as an annual war-risk coverage and a "breach" premium. Ships traveling to Red Sea ports are thus likely to see their insurance costs rise. In fact, breach rates have already risen to 0.015% of insurance costs in January 2021, up from about 0.012% in December 2020. This means a seven-day voyage in a high-risk area now costs tens of thousands of dollars more than it did a few months ago.

The US Maritime Administration has also issued a warning for seafarers to watch out for increasing military activity and political tensions, which are continuing to pose significant threats to commercial vessels. But you don’t need to be a keen observer of rising shipping insurance costs to know that piracy and military conflict have made shipping an increasingly risky job in the region. The Suez Canal blockage is a good example of the threats pirates and militia groups pose. Rather than leaving the canal and backtracking around Africa and the Red Sea, shipping companies preferred to wait for the Suez Canal to be unblocked. While this may have been a gamble that the blockage would pass faster than it would take to circumnavigate Africa, along with a reluctance to pay the extra fuel costs, the shipping companies and crews’ fears of pirates and militia could not go unnoticed.

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