Insurance rises in the Red Sea

ph Haydn Pound on Unsplash

Rising instability in the Red Sea, including increased shipping attacks, has significantly boosted insurance costs. This, along with higher Suez Canal transit fees, has deterred shipping companies from using this route.

The cost of insuring vessels has jumped to about 0.5 per cent of the value of a ship’s hull, a significant increase from earlier rates of about 0.1 per cent to 0.2 per cent. For a vessel costing 100 million dollars, an expense of 0.5 per cent translates to an insurance cost of 500,000 dollars per voyage.

As a result, many have chosen to reroute their vessels around Africa, despite this dramatically increasing transit time and shipping distance. These changes underscore the importance of stability in the region for global trade and highlight the economic implications of geopolitical tensions.

The Suez Canal is indeed a strategic crossroads for global trade. Any conflict or disruption in this region can have far-reaching impacts, causing significant changes in global shipping routes and costs.

A change in sea routes may have long-term implications on cargo traffic in Europe and economic implications for Mediterranean ports. Russia has an interest in shifting traffic to the Baltic area. (Redazione)

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