Israel marine war risk rates set for tenfold jump
‘Whenever it’s kicked off there in the past, there hasn’t been a big spike, because the northern ports tend to be quite far away from the action,’ argues broker
Lack of Hamas naval and mine-laying capacity means prices are unlikely to go as high as the Ukraine precedent
Marine insurers are expecting higher war risk rates and amended conditions for calls to Israel, as underwriters and brokers assess the implications of this weekend’s surprise Palestinian assault on the country.
But market sources argued the lack of naval capacity and inability to lay sea mines on the part of the insurgents mean prices will not reach the same peaks witnessed in the wake of Russia’s invasion of Ukraine last year.
The reported death toll from the fighting in Israel stood at 1,200 and rising as of early October 9, with Israel’s prime minister, Benjamin Netanyahu, launching a major military offensive against the Hamas-led Palestinian enclave in Gaza.
No ships have yet been affected by the hostilities, although there are reports of damage to the Israeli port city of Ashkelon, which has seen few vessel calls since an incident damaged a key jetty in March.
Like everyone else, marine insurers are still evaluating the sudden turn of events. But most regard more expensive cover as an inevitable consequence.
Israel is already designated a high-risk area because of the frequent outbreaks of fighting with the Palestinians, making it already subject to additional premiums (APs). But in practice, the risk to shipping has hitherto been regarded as low and APs have either been set at zero – so-called “nil APs” – or a nominal 0.1% or 0.15% of hull value.
The obvious parallel for what happens now is rates for calls to Ukraine, which have yoyoed in line with events and have at times hit double-digit percentage points.
Since Ukraine inaugurated its own unilateral grain corridor after the collapse of the Black Sea Grain Initiative, underwriters with higher risk appetites have been attracted back into the market and are quoting in the region of 3% to 6%.
The situation in Israel is still entirely fluid. But the gut feeling response from some underwriters is while pricing will firm from the present fraction of a percentage point, it will not reach similar peaks to those seen in Ukraine.
“Israel [rates] will probably increase and we have brokers out this morning finding out what the numbers are looking like,” the head of marine at a major broker said.
Another broker said: “The underwriters have all been talking to their specialists since the weekend and we are waiting for them to quote.
“Whenever it’s kicked off there in the past, there hasn’t been a big spike, because the northern ports tend to be quite far away from the action. That will change if Lebanon starts throwing rockets over that border,” the broker added. His best guess was rates of 1% in the next few days.
Hull war risk cover is now available commercially from Ascot, Axa XL, Beazley, Canopius, Hiscox, Navium and MS Amlin among many others, and can also be had at similar pricing through war risk mutuals.
Many protection and indemnity clubs offer war risk cover on a commercial basis, although the product is typically run from Lloyd’s, with the clubs running only a small retention and dependent on acting as prudent reinsured.
The definition of war risks is wider than just wars and civil wars, revolutions and rebellions and also includes capture and seizure, arrest and detainment, labour disturbances and riots and acts of terrorism, piracy and violent theft by people from outside the ship.
A war risk underwriter at a major corporate insurer said: “As of now we have not been approached for any call to Israel, but we expect to amend the current conditions when requested.”
Svein Ringbakken, managing director of marine mutual Den Norske Krigsforsikring for Skib, said: “We are deeply engaged in the situation in Israel and in dialogue with members.
“We have also sent out members-only intelligence reports yesterday ensuring members are fully aware of the situation, which is still developing.”
Frédéric Denefle, managing director of Paris-based war risk insurer Garex, said : “Other countries could be under the threat of conflict extension, including South Lebanon, Jordan and maybe Syria. Iran might also be involved into such extension with collateral effect of the Ormuz straight in case of retaliation.”
This article first appeared in Lloyd’s List, a sister publication of Insurance Day