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Red Sea Insurance Rates Stay Firm as US Airstrikes Raise Fears for Ships

Industry sources say that the cost of shipping goods across the Red Sea will remain stable after the United States conducted further airstrikes in Yemen on Monday. This has heightened fears about new attacks by Iran-aligned Houthis, who are targeted by Washington.

The U.S. conducted airstrikes Saturday in response to threats by the Houthi Movement to threaten international shipping. Al Masirah TV, a Houthi-run TV station, said that the Houthis targeted the Red Sea port of Hodeidah on Monday and the Al Jawf Governorate, north of Sanaa, according to the Houthis.

In January, Houthis announced that they would cease attacks on U.S.-UK linked shipping along with a truce between Israel and Palestinian Islamist Group Hamas.

After the announcement in January, war risk premiums dropped to about 0.5% of a ship's value from more than 0.7% in December. They then rose to 0.7% of a vessel's value in February for certain voyage rates. In recent weeks, some U.S.-UK linked ships were quoted rates up to 2% for those willing to still sail through the waterway.

Even though there are discounts, the cost of a seven-day trip would still be hundreds of thousands more dollars.

Industry sources stated on Monday that rates are likely to remain firm and could rise in the coming days.

Munro Anderson of Vessel Protect, a marine war-risk and insurance specialist part of Pen Underwriting, said that following the U.S. action there had been a "significant increase in the threat profile" against commercial maritime traffic in the Red Sea.

The threat profile is critical for all vessels operated and owned by Israel, as well as by U.S. entities."

Since November 2023, the Houthis has carried out over 100 attacks against ships. They have sunk or seized two vessels and killed four seafarers. They claim they were acting out of solidarity with Gazan Palestinians following Israel's war against Hamas that began late in 2023.

Houthi leader Abdul Malik al-Houthi stated on Sunday that his militants will target U.S. vessels in the Red Sea so long as the U.S. attacks Yemen.

Another insurance market source stated that "as soon as the missile is fired at a passing vessel, I will be pushing to increase rates."

Last week, the Houthis who control most of Yemen in the last decade said they would resume their attacks on Israeli ships that pass through the Red Sea, if Israel didn't lift its blockade on aid entering Gaza.

A maritime security source stated that "this intermediate period is risky for us because we do not have a clear picture of what to expect". (Reporting and editing by Ed Osmond, Yannis Souliotis, Additional reporting in Athens by Jonathan Saul)

(source: Reuters)