Middle East Tankers Attacks Lead to Spikes in Insurance Rates

The recent attacks on two tankers in near the Persian Gulf surges the price of insurance premiums for ships passing by the Middle East. The attacks also caused the cost of transporting oil from the Middle East to balloon.

Records show the insurance rates for crude oil tankers loading in the region went up to 20 times higher after the latest torpedo attacks.

An unnamed source said shipowners now need to pay 0.1%-0.4% of the value of their vessels in insurance. The rate was 0.02% before the attacks.

In dollar terms, war risk premiums owners pay each time their vessels go to the Persian Gulf have spiked to at least $185,000 for supertankers. It was a $50,000 increase a month ago before the attacks.

The source cited the underwriters’ concern that the incident will take place over the next weeks as the reason for the sharp rise in marine insurance premiums.

Any future attacks in the region are expected to launch a revision in insurance costs for ships passing by the area, the sources added.

A London-based broker at the Edge Group said additional attacks, may likely cause the situation to deteriorate further. Underwriters such as Edge Group, a marine, finance, and trade insurance provider, are trying not to offer coverage, especially for tankers in the region.

Freight Rates Not Yet Affected

Meanwhile, freight rates have not yet experienced a massive rise despite the significant impact of attacks on insurance.

Low demand from charterers and an oversupply in the tanker market have maintained the freight rates in the region.

A certain shipbroker said freight ships are still willing to go there despite the escalating tension.

But analysts warned there is a big possibility of sharp rises in rates if such attacks persist or become more frequent.

The US government blamed Iran for the attack on the two tankers, as well as the attacks last May on pipelines in Saudi Arabia and on vessels in the nearby waters near the country.