THE cost of war risk insurance for ships transiting the Red Sea is set to rise further despite doubling in the past week in response to multiple missile and drone strikes on vessels, according to market sources.

Marine insurers who spoke to Lloyd’s List cited 0.3%-0.5% as the indicative range, significantly lower than some media reports, which have 0.5%-0.7% as the current norm.

But with quotes typically valid for just 24 or 48 hours, the expectation is for a ratchet effect to push premiums northwards in the coming days.

“Red Sea prices are certainly rising still and with every attack they will continue move, I expect,” said one broker.

A Nordic underwriter added: “Where [rates] are heading is hard to predict, but certainly not down this side of Christmas.”

In cash terms, the higher rates could put as much as $760,000 on the cost of each voyage for a brand new $130m VLCC and push the million-dollar mark for an ultra-large boxship.

Separately, the Joint War Committee earlier this week extended the parts of the Red Sea subject to additional premiums, known as APs in industry jargon. The move had been widely expected.

The developments come in response to a spate of hijacks and missile and drone assaults on commercial tonnage launched by the Houthi faction in control of western Yemen, in a bid to add pressure on Israel’s military campaign in Gaza.

Given that the Red Sea is unavoidable for anyone using the Suez Canal in either direction, the threat to world trade has been deemed sufficiently serious to merit the launch of a multilateral naval escort operation under the banner of Operation Prosperity Guardian.

While the military effort was welcomed by marine insurers, it will probably take some time before it exerts a restraining influence on rates.

“Operation Prosperity Guardian will calm underwriters once it actually makes a difference in terms of protecting the ships in the area,” said Svein Ringbakken, managing director of Norwegian war risk mutual Den Norske Krigsforsikring for Skib.

“There is already some naval protection and ramping this up will take some time.”

Marcus Baker, head of marine at Marsh, said: “Operation Prosperity Guardian will I hope calm nerves, but the issue may still be whether crew will chance their arm to go to the region.

“Many shipowners seem to be focusing on crew safety right now, which frankly is probably the right thing to do.”

War risk rates typically stood at a nominal 0.05% at the onset of the Gaza fighting in early October, with many underwriters waiving them altogether.

But by last week they had risen to 0.1% to 0.2%, with uplifts of up to 250% of that figure for Israeli owners, who were singled out for Houthi invective. Some underwriters are unwilling to cover Israeli owners at all.

Now a run of attacks in recent days has sent premiums upwards to around half a per cent. By way of comparison, quotes for the Black Sea — where bulkers exporting Ukrainian grain have been declared a legitimate military target by Russia — stand at between 2.5% to 3%, despite there having been no attacks of late.

The key difference is that marine Red Sea war risk is still readily reinsurable. By contrast, Black Sea and Ukrainian port calls have to be written “net line”, with the full payout at an insurer’s own expense.

Reflecting the higher Red Sea insurance costs, a number of liner companies are asking customers for a war risk surcharge. Israel-owned Zim is seeking $50-$100 per teu, while Hapag-Lloyd will be demanding $40 a box from January 1. Maersk will be hitting customers for an extra $50 per teu from January 8.

The decision of the Joint War Committee — which brings together Lloyd’s syndicates and the London companies market was taken at a quarterly meeting held on Tuesday last week, even though the outcome was not announced until Monday.

The listed area sector of the Red Sea has been extended from 15° north to 18° north, the JWC said in a statement.