The war-risk insurance premium quoted for a tanker docking at Yanbu port in western Saudi Arabia has jumped to about 3% of the vessel’s value, from less than 1% at the beginning of July, according to 4 sources in the insurance sector. This raises the cost of using the port as an alternative route for oil exports away from the Strait of Hormuz.
The sources said insurance premiums could rise to 7% for vessels bound for Saudi ports south of Yanbu, including Jazan in the south of the kingdom, compared with between 6% and 9% for passage through Hormuz.
Cost of sea voyages
Insurance premiums for tankers transiting the Red Sea without links to Saudi Arabia typically range from 0.2% to 0.3%, according to the sources. The rates actually agreed between insurers and clients differ from the quoted offers.
Industry sources estimate that insurance for a voyage from Yanbu could cost $3 million, rising to about $7 million from ports farther south or via Hormuz, compared with no less than $100,000 before the war.
Added to the insurance cost is a tanker charter rate of at least $500,000 a day, along with fuel costs that could exceed $100,000.
East-West pipeline and loading halt
Saudi Arabia used the East-West pipeline to divert about 4 million barrels per day to the Red Sea after Iran restricted Gulf exports through Hormuz. The kingdom halted the pipeline on September 11 this year following drone attacks that it said had been launched from Iraq.
Riyadh is working to restore the flow of oil, while tanker loading at Yanbu had not resumed when the information in the report was prepared.
Local pool to cover war risks
The increase in insurance costs coincided with threats by the Houthis to target Saudi-linked vessels near Bab el-Mandeb. As coverage costs rose, the Saudi Council of Ministers tasked the Saudi Reinsurance Company with leading a local pool to provide marine war-risk insurance.
