Ship insurers restrict war coverage for Saudi Arabian cargoes in Red Sea

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Top shipping insurers have told brokers that they will not sell war cargo insurance to Saudi Arabia-linked ships in the Red Sea, following attacks by Yemen’s Houthi rebels, in a further risk to oil exports from the region.

Several of the leading marine war insurers at Lloyd’s of London market said on Friday that they would exclude vessels with any “Saudi touchpoints” from coverage, two brokers said, including ships travelling under other flags that have made past calls at Saudi ports.

The Red Sea and its port of Yanbu have become increasingly critical to the kingdom’s oil exports because of the reliance on the East—West pipeline to move crude while the Strait of Hormuz remains largely closed.

The export route can handle as much as 5mn barrels a day of Riyadh’s prewar crude exports of roughly 7mn b/d.

Some insurers are also preparing to cancel existing cargo insurance for certain Saudi-linked vessels, the two brokers added. Underwriters Ascot and Navium told brokers after Wednesday night’s attack, which targeted two oil tankers, that they were preparing to cancel policies for some Saudi-linked tonnage in the Red Sea. Navium declined to comment. Ascot did not immediately respond to a request for comment.

Saudi Arabia may be “moving into the same bracket” as Israel, the US and UK in the Red Sea region, said Marsh broker Marcus Baker, with underwriters treating ships with links to these jurisdictions more cautiously owing to heightened risk.

Ships with links to the US, UK and Israel already pay higher premiums for marine war cover on cargoes in the Red Sea.

But the latest attacks represent increased risks to Saudi-linked vessels following a warning to mariners by the Iran-backed Houthi militant group on Monday that vessels calling at Saudi ports would be targeted “in any location within the operational reach of the Yemeni Armed Forces”.

Two tankers, the Saudi-flagged Encelia and Layla, were attacked on Wednesday night in strikes claimed by the Houthis. 

Several ships carrying cargoes from Saudi Arabia have either U-turned in recent days in order to take the longer voyage to Asia through the Mediterranean and via the Cape of Good Hope.

Others such as the Greek-owned Merbabu, which is carrying 700,000 barrels of crude from Yanbu to India, have turned off their GPS signals in order to transit the Bab al-Mandab Strait at the southern end of the Red Sea close to the Yemeni coast.

Three tankers belonging to the Saudi national shipping company Bahri in the south of the Red Sea also appear to have turned off their GPS signals.

A spokesperson for the Houthis said on X on Friday, however, that “there is no closure” of the Bab al-Mandab Strait and that the Yemeni group was conducting a “naval blockade targeting only the Saudi side”.

Two Chinese-owned tankers, the Xin Long Yang and Cosnew Lake, both carrying crude oil from Saudi Arabia, started to U-turn on Tuesday before changing course again to successfully pass through the Bab al-Mandab Strait on Thursday. Both were broadcasting that they were “China crew & owner”.

Baker at Marsh added that it was unclear when insurance would become more widely available for Saudi-linked vessels, since this depended on “when the Houthis are going to stop their threats”.