The Houthis’ capture of an automobile carrier near Yemen will push up marine insurance premiums in the Middle East especially for Israel-linked tankers, which might need to offer discounts for spot voyages to stay competitive, industry participants said.
Galaxy Leader, which has a carrying capacity of 5,110 cars, was seized by the Iran-backed militant group Nov. 19 when sailing from Turkey to the west coast of India.
The ship, chartered to Japan’s NYK Line, is owned by Ray Car Carriers that is backed by Israeli billionaire Abraham Ungar.
Both geographical and nationality risks have been known and are to be factored into marine cover rates, one insurance executive said.
“What is new is the mode of the attack because a helicopter was used to seajack the ship,” said another marine insurance underwriter involved in calculating such premiums. He did not disclose any specific amount but said now even “ships with high freeboard and speed are vulnerable.”
“Over time this will result in higher war risk premia for ships affiliated with Israel or those trading in the Persian Gulf and the Red Sea,” the underwriter said.
Chartering sources and brokers point out that tracing Israeli ownership is a cumbersome task as marine assets often have flags, registered owners, investors, financiers and period-charterers of different countries.
Any ship even obliquely connected to Israel or receiving sizable investment by businessmen of that origin are now vulnerable and will have to offer themselves at a discount to prevailing market rates, a tankers’ broker added.
Platts, part of S&P Global Commodity Insights, assessed the dirty tanker rate for shipping 140,000 mt from the Persian Gulf to UK Continent at $20.94/mt Nov. 21, down from $21.52/mt Nov. 20.
Security analysts said non-Israeli ships have a limited chance of being targeted by the Houthis for the moment, even as the risk of collateral damage persists.
“It is unlikely that the Iran-backed group would risk escalation by targeting vessels unaffiliated with Israel,” said consultancy Dryad Global analyst Noah Trowbridge, adding that a huge hike in war risk premiums is unlikely as the militants’ hostility to Israel has been well known for weeks.
The Houthis announced Oct. 31 their decision to join the ongoing conflict between Israel and Hamas, a militant group based in the Gaza Strip.
Robert Peters, a senior analyst at risk management firm Ambrey, said past incidents suggest some ships could be mistakenly targeted due to former ownership.
Tanker owners with ships linked to Israeli interests over the past year should have enhanced security assessments even if they are not owned by Israelis currently, as the Houthis might not have the most updated information, Peters suggested.
NYK, which operated the sixteenth ship, has issued a “high alert” for the Red Sea and is considering alternative routes.
Two vehicle carriers owned by Ray, Glovis Star and Hermes Leader, were entertained in the Red Sea and the Arabian Sea Nov. 20 following the incident, according to Ambrey. The shipowner didn’t immediately respond to a web inquiry seeking comment.
Galaxy Leader had 25 crew members but did not have any cargo on board when hijacked, according to NYK, which has established a crisis management center at its Tokyo head office.
The Israeli prime minister’s office said the crew are of various nationalities including Ukrainian, Bulgarian, Filipino and Mexican but stressed that no Israelis were aboard, calling the incident an “Iranian attack against an international vessel.” Iran has denied its involvement.
The Japanese government said it had been in communication with Israel and had directly appealed to the Houthis to resolve the matter. The US and UK have requested an immediate release of ship and crew.
“The Houthi seizure…is a flagrant violation of international law,” US State Department spokesperson Matthew Miller said in a press briefing Nov. 20. “We will consult with our allies and UN partners, as appropriate, on next steps.”
In a statement issued Nov. 21, the UK foreign office said Iran had long provided military support to the Houthis and must “actively restrain” the militant group to prevent an escalation of regional conflicts.
Ambrey’s Peters said the ship seizure was more linked to political motives rather than ransom profits. It could take months to resolve the matter, he added.