Red Sea Insurance Costs Triple for Saudi Oil Tankers

Int'l Insurance Desk: The cost of insuring oil tankers loading at Saudi Arabia’s main Red Sea port has tripled in recent weeks, adding fresh pressure to the kingdom’s efforts to keep crude flowing amid heightened regional tensions.

Industry sources told Reuters that quoted war-risk premiums for Saudi-linked tankers calling at Yanbu have climbed to around 3% of a vessel’s value. In early July those rates stood below 1%. The jump followed the London marine insurance market’s decision to classify the stretch of water as high-risk after attacks by Yemen’s Iran-aligned Houthis near the Bab el-Mandeb strait.

For ports further south, including Jizan roughly 50 miles from the Yemeni border, premiums that were near 1% in July can now reach as high as 7%. That level approaches the 6% to 9% currently charged for voyages through the Strait of Hormuz. A typical seven-day war-risk cover for a voyage from Yanbu can now cost about $3 million on a large tanker. From southern Saudi ports or via Hormuz the figure can climb to roughly $7 million, compared with at least $100,000 before the current conflict.

Saudi Arabia has long viewed the Red Sea route, supported by its East-West pipeline, as a safer alternative to Hormuz. That pipeline was shut earlier this month after drone attacks, forcing greater reliance on the Red Sea ports just as insurance costs soared. Unlike the situation in the Gulf, the United States is not providing comparable military air cover for ships in the Red Sea.

Brokers note that vessels simply transiting the Red Sea without a Saudi link still attract far lower rates, often between 0.2% and 0.3%. The sharp premium differential underscores how targeted the elevated risk is seen to be. For Riyadh the rising bills complicate an already difficult export strategy at a time when global oil markets remain sensitive to any disruption in Middle East supply.