Chinese-owned merchant ships have been obtaining significant discounts on their insurance when sailing through the Red Sea, reports Bloomberg. Citing people involved in the market, it said that some Chinese-linked vessels were having to pay as little as 0.35% of their hull and machinery value to obtain insurance for transit.
Most ships were paying somewhere between 0.5% and 0.75% — although that could vary significantly, the sources said.
Hull & Machinery cover for such journeys is a competitive market, and a top-line rate can be reduced significantly by a no-claims discount, making direct rate calculations difficult-to-impossible.
The discounts cited would translate into savings of $150,000 and $400,000 per transit for a vessel valued at $100m for H&M purposes.
Rates for war insurance in the Red Sea have been volatile since the Houthis hi-jacked the Galaxy Leader last November, but after increasing by several hu8ndred per cent at the beginning, in recent weeks the rates have settled down.
Munro Anderson, head of operations at marine war risk and insurance specialist Vessel Protect, said that “the market is reflecting the lower risk profile faced by Chinese- and Hong Kong-connected vessels, as shown in the increased Asian-flagged and connected tonnage transiting the region”, while adding the caveat: “that said, despite a declaration of safe passage by the Houthis, there are no guarantees that incidents of miscalculation can be avoided”.
Though Chinese ships are seeing discounts compared with most of the market, some vessels with ties to the US, UK and Israel are having to pay more for cover.
Media talk that cover for some vessels was “unavailable” appears to have died down. Market sources noted that, since UK and US-linked ships had still been sailing through the Red Sea, by definition they had been able to obtain cover somewhere, albeit at a price.
In January the Houthis told Russian newspaper Izvestia that Chinese and Russian ships would be safe from attack, but that this exemption did not extend to the cargoes that the vessels transport. The implication of this is that US and UK-linked vessels carrying Russian cargo would remain Houthi targets.