Insurers brace for impact as Maersk halts Red Sea shipping

In response to escalating maritime security risks in the Red Sea, A.P. Moller-Maersk has announced it will halt shipping in the region.  

The prominent Danish shipping company has announced a temporary suspension of all container shipments through the Red Sea. Instead, all ships will be rerouted around Africa until further notice.  

This decision is prompted by a series of attacks on commercial ships in the region, particularly from a section of Yemen controlled by the Iran-backed Houthi rebels. 

The Red Sea is a critical trade route which sits between Africa and Asia. The area is something of a chokepoint for global oil trade. That makes it a significant area for the global insurance sector, especially concerning maritime security risks.  

The shipping industry is no stranger to international controversy. Back in August, Claims Media reported on delays to shipping due to the international conflict between Russia and Ukraine in the Black Sea. 

But a spate of recent attacks has heightened concerns around the Red Sea region. Recent attacks on vessels include the targeting of Maersk’s vessel, Maersk Gibraltar, during its journey from Salalah, Oman, to Jeddah, Saudi Arabia. Although the crew and vessel were reported safe, the Iran-backed Houthi rebels claimed responsibility for a drone attack on the Maersk container vessel. 

The insurance industry faces new challenges as the shipping sector grapples with heightened security threats. In making this dramatic move, Maersk is acknowledging the significant threat these attacks pose to the safety of seafarers. 

This development has broader implications for insurance premiums, with the shipping industry experiencing increased costs. According to an S&P Global report, Long Range (LR) tankers, carrying up to 90,000 mt cargoes, now incur an additional $150,000 security charge for each voyage when transporting refined products from the Middle East and India to Africa. 

Furthermore, the insurance landscape is evolving, with ships associated with Israeli ports or having ownership ties, flags, or technical management linked to Israel facing higher war risk premiums.  

This shift in risk dynamics has prompted insurers to reassess their coverage and pricing strategies in response to the changing geopolitical landscape. 

The UK’s Maritime Trade Operations is currently issuing regular alerts about uncrewed aerial systems or drones in the region. 

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Josie Miller Josie is an editor for Claims Media. She welcomes feedback, comments, and opinion at josie.miller@barkerbrooks.co.uk