The Suez Canal Authority (SCA) should involve insurance companies in future discussions on Red Sea transits, Port Said Chamber of Shipping chairman, Adel Ellameey has urged.

PHOTO: Daily cargo vessel transit calls from the Suez Canal in the past 3 months. IMF Portwatch

Reclassifying the Red Sea and Bab El Mandeb as safe transit zones could encourage shipping firms to return sooner to these routes, Ellameey argued.

His remarks came during a meeting between the SCA and representatives of 23 container liners and shipping trade bodies, where SCA chairman, Ossama Rabiee, discussed the conditions for a possible return to the Suez Canal route.

Participants included A.P. Moller-Maersk, CMA CGM, COSCO, Evergreen and Mediterranean Shipping Company. All these shipping companies diverted vessels away from the Red Sea amid security concerns in the region.

While security risks have since eased following the Yemen-based Houthi rebel group’s announcement of a halt to attacks after the Israel-Hamas ceasefire, many shipping operators still remain hesitant to return.

One of the main reasons for this reluctance could be the persistently high cost of war risk insurance.

High premiums remain a barrier

Last year, several Protection and Indemnity (P&I) clubs expanded additional war risk premium zones across the Indian Ocean, Gulf of Aden and Southern Red Sea as attacks on commercial vessels intensified.

ENGINE reported that war risk insurance premiums soared to 1% of cargo value at the height of the crisis in January 2024. Adding the 1% war risk premium to the annual insurance premium meant that shipowners would have to spend an additional $1-2.5 million/vessel on war risk insurance if they chose to operate in the Red Sea region.

Even though security risks have eased, insurers have not rolled back these war risk premiums.

In an advisory issued last month, marine insurer Gard recommended that shipowners and charterers continue to monitor the situation and conduct a voyage-specific risk assessment before considering Red Sea transits. The advisory cited the risk of renewed attacks if the Israel-Hamas ceasefire collapses.

Marine insurance firm NorthStandard Protection & Indemnity Club confirmed that it will continue to impose additional premiums for vessels transiting the Indian Ocean, Gulf of Aden and Southern Red Sea in 2025, reinforcing concerns that war risk costs may remain elevated for the foreseeable future.

Need for stability

Last week, Maersk and CMA CGM confirmed that their vessels will continue sailing via the Horn of Africa rather than returning to the Red Sea.

While shipping firms assured the SCA in the meeting that they remain open to resuming Red Sea transits once conditions stabilise, they may be reluctant to return to the Suez Canal without a reduction in war risk premiums, which are pushing up overall insurance costs.

By Konica Bhatt

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