News Middle East16 Jun 2019

Middle East:Tanker insurance costs rise following latest attacks

16 Jun 2019

Insurance costs for ships sailing through the Middle East have increased by at least 10% after attacks on two tankers in the Gulf of Oman on 13 June, with the potential for costs to rise further as regional tensions escalate, reported Reuters quoting ship insurers.

Some tanker companies have already suspended new bookings to the Middle East Gulf.

Ship insurers say the biggest vessels sailing through the Gulf area face additional costs of up to $200,000 for a single seven-day voyage, roughly twice as expensive as earlier this week.

"This is not the first incident, and what we are seeing (with rates going up) reflects the worsening situation in the area."

On 17 May, the London insurance market's Joint War Committee extended the list of waters deemed high risk to include Oman, the UAE and the Gulf after separate ship attacks off Fujairah.

"War-risk premiums have already gone up since the decision by the Joint War Committee to extend the high-risk zone and they are now in the double digits," said Marcus Baker, global head of the marine practice at insurance broker Marsh.

About a fifth of the oil consumed globally passes through the Strait of Hormuz, shipped from Gulf energy producers, including Saudi Arabia, the world's biggest crude exporter.

DNK, the mutual insurer that covered one of the ships damaged last Thursday, will increase its rates for war insurance, according to a person familiar with the matter, reported Bloomberg. Rival insurer Hellenic War Risks Club will probably increase a so-called additional premium that owners pay when sailing to the Persian Gulf with immediate effect, according to a notice on its website.

DNK insured the Norwegian-owned Front Altair for the full value of the vessel, according to the person familiar. A ship of that tanker's size is worth between $30m and $50m, according to another person with knowledge of the matter. The Front Altair's cargo of naphtha would be insured under a separate policy.

Shipping companies should consider diverting vessels from the area where the two vessels were attacked on 13 June, industry group BIMCO, the largest international shipping association for owners, said in a security advisory to its members. Tensions in the Strait and the Gulf are now at the highest they can be without an actual armed conflict, the group said in a separate statement.

 

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