War risk insurance rates climb sharply as US builds force

21 September 2001 00:24  [Source: ICIS news]

HOUSTON (CNI)--War risk insurance rates for chemicals cargoes and ships carrying them have begun to climb sharply as US naval and air forces close on the Arabian Sea and other areas near Afghanistan, industry sources said Thursday.

The war risk scale rate for cargoes to any destination have jumped nearly 50% to 0.05% of the insured value of cargo, maritime insurance sources said. The increase goes into effect on Monday.

Shipments to specific areas regarded by insurance underwriters to be at risk of war also are subject to an additional war risk premium that is set daily and can range from 0.1% to as high as 2% of insured value of cargo, according to Doug Parks, director of marine insurance for Portland, Oregon-based Emery & Karrigan.

Prior to last week's terrorist attacks on the US, said Parks, the list of war risk countries included only Yugoslavia, Sri Lanka and Nigeria. The list has now been expanded to include Yemen, Oman, Syria, Algeria, Egypt and, in general, ports on the Gulf of Aqaba, the Red Sea and the Persian Gulf.

Other sources report that ship owners are beginning to impose a 10% surcharge on cargoes destined for the Persian Gulf or the Arabian Sea, reflecting ship owners' purchase of war risk coverage for their vessels. Combined war risk coverage for cargoes and pass-along war risk insurance costs from ship owners may mean additional costs of slightly more than 12%.

Parks said the war risk scale rate - charged by insurers to small or medium-size shippers - has been .0275% for about ten years because there have been few areas of hostilities worldwide affecting major sea lanes.

"Now, literally overnight, the war risk rates are going beyond anything seen recently," Parks said, noting too that there has yet to be any hostilities in the Arabian Sea or adjacent areas.

By: Joe Kamalick
+1 713 525 2653

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