Insurance Costs Surge on Red Sea Routes
Isn’t it intriguing that only the major container lines and not tankers, LNG and bulk carriers have diverted from the Red Sea routes. A Suezmax tanker with a load of 750,000 barrels priced at $80/bbls is a cargo worth around $60 million. At a war risk insurance of 0.7% that amounts to $420,000. A 10,000 container ship could have cargo worth a $1m in just a single container which calculates the net worth of a container ship at potentially a $ billion for Ultra large container vessels and at $500m cargo evaluation that is staggeringly close to $3.5m in war risk premium.
Susceptibility of Fire Caused Damage& War Risk Premium
An attack by a small sized drone or an unmanned aerial vehicle (UAV) launched by Houthi forces may cause a fire on a container vessel and LNG/LPG carriers remain at significantly higher risk of fire yet it seems that such LNG or LPG ships have successfully negotiated substantially lower war risk insurance than the publicly declared 0.7 % rate which has the inbuilt costs now of coalition force escort.Surge in insurance costs and war premium is a financial cost of maintaining US and Western Naval fleets with freight and logistic costs becoming increasingly expensive .Not to mention the additional bunkering cost for ships sailing the longer route around the Cape of Good Hope and the inconvenience of bunkering as the longer route does not have adequate bunkering hubs.
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