Insurance underwriters insert ‘no connection to Israel’ clause for shipping

Insurance underwriters are requiring some clients to sign contracts guaranteeing that they have no connection to Israel or the US in order to obtain cover for cargo ships passing through the Suez Canal, the New York Times has reported. The demand comes as Houthi attacks in the Red Sea have pushed up insurance premiums for merchant vessels.

According to the NYT, the attacks at this critical choke point handling 12 per cent of global trade have more than doubled the average worldwide shipping costs. Some ships are opting to avoid the Suez Canal and instead take the longer route around the Cape of Good Hope in South Africa, adding weeks to delivery times.

Passing through the Red Sea still necessitates expensive speciality war risk insurance offered by London brokers to cover potential Houthi strikes. Rates have jumped as much as 50 times more than before the Yemen conflict, and now cost up to one per cent of a ship’s value despite relatively minimal damage to ships so far. For a ship carrying goods worth $100 million, that could mean an extra $1m to be insured.

Read: The Houthis are turning the tables on everyone

Insurers blame the increased risk on Israel’s military offensive against the Palestinians in Gaza. By forcing clients to guarantee that they have no ties with Israel and its Western allies, underwriters aim to shield themselves from inadvertently covering any vessels associated with the current geopolitical tensions underlying the attacks.

Analysts say that the ripple effects on global trade and consumer prices are still unfolding. They warn that if Red Sea transit remains high-risk, inflation could return.

The demand by underwriters follows previous preventative measures taken by vessels to avoid Houthi attacks. Earlier this month, cargo ships passing into the Red Sea began to declare that they have no links to Israel, according to data from the navigation safety feature known as the Automatic Identification System (AIS), which transmits the identity, location and destination of larger vessels.

Israel’s Western allies appear to be running out of options in their attempt to contain the Houthis. Yesterday, the Financial Times revealed that the US has urged China to help curb Houthi attacks around the crucial Bab Al-Mandab Strait. Chinese ships are not being targeted by the Yemeni group and nor are vessels of countries that are not supporting Israel’s genocidal campaign in Gaza. Nevertheless, China is reported to have expressed “concern” about the attacks, and called for “restraint”.

Read: Houthis threaten to target US warships if they attack Yemen