Red Sea attacks spike marine insurance rates

Mumbai: Insurance companies have increased the premium rates for providing marine war, Strike, Riots, Civil Commotion (SRCC) and piracy cover for shipments passing through the Red Sea by around 25 to 30 times of the existing rates. A host of non-life insurance companies namely New India Assurance, United India Insurance, National Insurance, and Tata AIG have identified the path through the Red Sea to the Suez Canal as a high-risk area and have withdrawn marine war, SRCC and piracy cover. Insurance companies are now asking for an additional premium of 0.10-0.15 per cent (of the insured value) from 0.005 per cent charged earlier. Cancellation notices by these insurers in relation to war, SRCC and piracy cover in the surrounding areas of the Red Sea and Suez Canal have been issued last week sources said.

According to industry officials, national reinsurer General Insurance Corporation of India (GIC Re) is also likely to issue a Notice of Cancellation (NOC) of War Cover. A Notice of Cancellation (NOC) of War Cover by GIC Re would mean that all insurers supported by the state-owned reinsurer would also be issuing a Notice of Cancellation of the existing contracts and are likely to demand an additional premium to provide war cover. An email sent to GIC Re remained unanswered for the past five days.

“Exporters and importers are taking a detour to Cape of Good Hope and avoiding the Red Sea and Suez Canal. Till now, the war cover rate was bundled into the main cargo rate and was as low as 0.005 per cent.

However, for cargo transiting through the high-risk area, an additional war risk premium rate will be charged at 0.15 per cent of the cargo value by insurers,” said an industry official. According to media reports, about 65 per cent of India’s crude oil imports in FY2023, worth $105 billion, likely passed through the Suez Canal. In terms of overall merchandise trade with Europe and North Africa, India’s exports and imports in FY2023 were $106 billion and $98 billion, respectively. Approximately 50 per cent of these imports and 60 per cent of exports, totalling a trade value of $113 billion annually, may have utilised the Suez Canal route.