Howden launches Red Sea cargo war risk coverage

Global broker Howden has launched what it claims is the first cargo war risk facility to cover vessels in the Red Sea.

The area has become a target for drone and missile strikes from Yemen-based militia in recent months. Since October 2023, the Iran-backed Houthi rebels have attacked more than 60 vessels in response to the Israel-Hamas conflict in the Gaza Strip.

Howden said the largest limit quoted so far amounted to $150m per vessel.

According to Howden, it is the first dedicated insurance policy to offer coverage in an active war zone – encompassing the Bab al Mandab Strait, the Red Sea and the Indian Ocean.

“The conflict in the Red Sea has presented a significant obstacle to clients with operations in the region,” said Ellis Morley, associate director, cargo and commodities, Howden.

“Vessels are seeking protection as they navigate this security hotspot, and we have worked with specialist marine underwriters to launch this facility, protecting cargo in the region up to a limit of $150m per vessel.”

The attacks have caused significant disruption to global supply chains. The Red Sea represents a key shipping area and with access to the Suez Canal, cargo ships can avoid a journey around the Cape of Good Hope, which adds two weeks and 70% emissions to the typical journey from the Far East to Europe.

In February, a report from the United Nations Conference on Trade and Development (UNCTAD) found that war risk premiums had increased by as much as 900% since the Houthi attacks, from less than 0.1% of the value of a vessel to more than 1% in some cases.

The UNCTAD report also found that journeys through the Suez Canal had dropped by 42%, corresponding to approximately 12% of total trade volume.

Meanwhile, analysis from the Russell Group estimated that up to $3trn of global trade is at risk from continued attacks in the Red Sea.