A disparity in additional premiums for the new Listed Areas in the Middle East, implemented in the wake of attacks on four tankers off Fujairah on May 12th, has caused confusion between charterers and owners, reports Splash.
In the wake of the attacks the Joint War Committee of the London market earlier quickly extended the list of waters deemed to be high risk to include Oman, the UAE and the Gulf.
Hong Kong-based insurance brokers Latitude Brokers warned via social media that the insurance market was “struggling with consistency”, and that this was creating problems for charterers and owners alike.
The insurance market appeared to agree that the area had become more risky, but not to agree precisely how much more risky, which meant that there was not consensus about how the additional premiums should be priced.
Charterers have to pay for ships under time charters, but they reported seeing one ship paying as little as one quarter of the price of the same call for a similar ship in another fleet with a different war risk leader.
Andrew Brooker, Latitude’s founding partner, told Splash that “as we anticipated, the market will take some time to price breaches consistently which is likely to create substantial disruption among charterers and owners as voyage costs increase. Whilst the war market receives intelligence on the threat levels within the region, the industry hasn’t had an opportunity to consider risk management advice that would reduce the risk of an incident – something we expect will be forthcoming as the insurance market works to reduce exposures.”
Brooker said that, given the sheer volume of traffic through the Strait of Hormuz and specifically the number of ships calling at Fujairah, even the lowest additional would generate substantial additional costs across the industry that had not been anticipated.
Jonathan Jones, who heads up the Hong Kong China War Risk Syndicate, said that “since the Iran/Iraq tanker wars of the 1980s , the majority of war underwriters, brokers and owners have thought war insurance is only about piracy. The recent events, coupled with a handful of deprivation claims, has put the cat amongst the pigeons”.
Latitude said that “for the time being, there’s likely to be a lot of unhappy operators pushing hard to minimise their exposure to additional premiums”.