Marine war-risk premiums for shipping through West Asian routes, particularly the Red Sea, have dramatically surged by up to 200 per cent, and in some cases over 1,000 per cent, as escalating geopolitical tensions force vessels to reroute and insurers to reassess risks.
Key Points
- Marine war-risk premiums for West Asian shipping routes, especially the Red Sea corridor, have increased by up to 200 per cent due to renewed geopolitical tensions.
- Some high-risk transits have seen premiums rise by 200-300 per cent, with the riskiest voyages climbing from 0.2-0.5 per cent to 3-5 per cent of vessel value.
- Ships are increasingly avoiding the Red Sea and taking the longer route around the Cape of Good Hope, leading to increased voyage times and freight costs.
- The sovereign-backed Bharat Maritime Insurance Pool (BMIP) rates have remained unchanged so far, despite the pool reporting its first loss, but are currently under review.
- Reinsurers have become concerned following renewed conflict, driving up rates after a brief period of easing post a ceasefire agreement.
War-risk premiums on West Asian shipping routes, particularly the Red Sea corridor, have hardened over the past few weeks amid renewed geopolitical tensions in the region, with premiums for high-risk transits rising by as much as 200 per cent, according to industry brokers.
However, the rates under the sovereign-backed Bharat Maritime Insurance Pool (BMIP) have remained unchanged so far despite the pool reporting its first loss.
Escalating Tensions and Rerouting
Marine war-risk premiums had begun easing after Iran and the US signed a ceasefire agreement in Geneva and trade conditions stabilised.
But renewed military activities in the region have reversed that trend, driving premiums higher.
According to industry experts, ships are increasingly avoiding the Red Sea because of security risks around the Bab-el-Mandeb Strait, where Houthi attacks have intensified.
As a result, vessels are taking the longer route around the Cape of Good Hope, increasing voyage time and freight costs.
"The renewed military escalation within days of signing the ceasefire agreement in Geneva has reversed that trend. Reinsurers have become concerned again and have started increasing war-risk rates.
"Premiums had begun declining about a month ago, but international reinsurers started hardening rates around two weeks ago following renewed conflict.
"Recent placements show reinsurance-driven war premiums rising by 50-200 per cent, depending on the route, cargo and insurer," said Gaurav Agarwal, head of marine specialities at Prudent Insurance Brokers.
BMIP Rates Under Review
"The BMIP's committee reviews rates every week.
"As of now, the rates are under review and the outcome is expected early next week.
"Until then, existing rates will continue," Agarwal added.
The $1.5 billion sovereign-backed BMIP, managed by GIC Re, provides war-risk cover in high-risk zones for cargo, hull and machinery, and protection and indemnity (P&I) risks for Indian shipowners.
The pool has an initial underwriting capacity of about Rs 927 crore, with GIC Re contributing Rs 400 crore and the balance by public-sector and private general insurers.
Impact on Insurers and Voyage Costs
Amit Goel, director at Equirus Raghnall Insurance Broking, said: "Even without a formal closure of the shipping lane, insurers and reinsurers are likely to reassess the risk, leading to higher war-risk premiums, tighter underwriting and, in some cases, reduced capacity.
"If the threat persists, premiums for transiting the affected region could increase several-fold, materially adding to voyage costs."
According to Equirus Raghnall Insurance Broking, war-risk premiums on Gulf shipping routes have risen sharply.
Premiums for high-risk transits have increased 200-300 per cent and, in some cases, by more than 1,000 per cent.
Rates for the riskiest voyages have reportedly climbed from 0.2-0.5 per cent of vessel value to 3-5 per cent.
