Red Sea Risks Impacting Cargo Movements

Current situation in the Red Sea 

 Since 19^th November 2023 there have been numerous attacks on international shipping vessels by the Iranian-backed Houthi militia group in the Red Sea – a route that accounts for approximately 15% of global seaborne trade.

Sparked by the conflict in Gaza, the Houthi initially stated intent to attack Israeli owned, flagged or operated vessels, however many of their recent targets have no connection with Israel.

The first of these attacks saw the Bahamas flagged car carrier Galaxy Leader seized by the Houthi militia and, since then, the group has attacked a number of shipping vessels with missiles, drones and speed boats.

The situation continues to escalate with a recent joint military response from the US and UK, with support from Western allies including Australia and Canada. 

The situation poses significant threat to lives, the global economy, and the safe and free flow of commerce in the region’s critical waterways. 

 How is the maritime industry reacting? 

 Following the seizure of the Galaxy Leader and the ongoing attacks, most major shipping lines have decided to bypass the Red Sea route and divert around South Africa’s Cape of Good Hope.

Data reveals that as of 12th January 2024, more than 500 merchant vessels are actively diverting, will divert, or have already diverted the Red Sea.

This diversion adds around 10 days and 1,900 nautical miles to a typical Asia-North Europe voyage, with increased costs significantly impacting global shipping rates.

 Major shipping lines state they will continue diversions until greater security can be assured in the region. 

 Disruptions are expected to persist for the foreseeable future, and shipping lines are advising customers to prepare for ongoing complications, delays and increased costs across the global network.

Continued risks and cancellations

 Despite most shipping lines putting diversions in place, some container and bulk carrier vessels are maintaining their regular routes through the high-risk Red Sea region.

 Notices of Cancellation (NoC) for War and Strikes cover are expected to be issued by many major insurers in coming days. As such, caution should be taken by cargo owners considering shipments through the high risk area.

We encourage brokers to urgently speak with their customers (and vice versa) if there are concerns about cargo passing through the region. And as always, insurance brokers should speak with their local NTI representative if they have concerns about existing policies. 

 NTI will continue to closely monitor and assess this situation with more information to come as events unfold.