Red Sea Attacks Continue | War Risk Insurance | Suez Canal Transits Fall

Proof of War Risk Insurance

What’s Going on With Shipping?
Jan.17, 2024

In this episode, Sal Mercogliano – maritime historian at Campbell University (@campbelledu) and former merchant mariner – discusses the latest attacks by the Houthi on Global Trade, the reduction of transits through the Suez Canal, the issues regarding war risk insurance, and how can this be resolved.

#redsea #houthi #piracy #iran #somalia #prosperityguardian #babelmandeb #shipping #supplychain #attacks #navy #convoys

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00:00 Introduction
00:47 Houthis Continue Attacks
03:40 Suez Canal Transits
05:48 Military Strikes Against Houthis
12:28 War Risk Insurance
17:16 How to Resolve?

Red Sea Attacks Continue to Disrupt Global Trade

Red Sea Attacks Continue to Disrupt Global Trade

The Red Sea Crisis: Possibly the Beginning of Something Bigger

The Red Sea Crisis: Possibly the Beginning of Something Bigger

Maersk CEO Sees Red Sea Shipping Disruption Lasting ‘at Least a Few Months’

Maersk CEO Sees Red Sea Shipping Disruption Lasting ‘at Least a Few Months’

Suez Canal Transits Fall to Lowest Level Since Ever Given Grounding

Suez Canal Transits Fall to Lowest Level Since Ever Given Grounding

Port Watch Suez Canal Transits
https://portwatch.imf.org/pages/573013af3b6545deaeb50ed1cbaf9444

U.S. Confirms New Military Strikes in Yemen, Houthis Hit Bulk Carrier

U.S. Confirms New Military Strikes in Yemen, Houthis Hit Bulk Carrier

U.S. Navy Seizes Iranian Weapons Bound for Houthis

U.S. Navy Seizes Iranian Weapons Bound for Houthis 

Biden Administration Re-Designates Houthis as Terrorist Group

Biden Administration Re-Designates Houthis as Terrorist Group

EU Member States Back New Naval Mission in Red Sea

EU Member States Back New Naval Mission in Red Sea

Xi Steers Chinese Navy Away From Red Sea Risk

Xi Steers Chinese Navy Away From Red Sea Risk

LNG Carriers Divert From Red Sea as Qatar Warns of Escalation

LNG Carriers Divert From Red Sea as Qatar Warns of Escalation

Russian Oil Still Going Through Red Sea Despite Houthi Missiles

Russian Oil Still Going Through Red Sea Despite Houthi Missiles

Red Sea Insurance Soars After US Airstrike

Red Sea Insurance Soars After US Airstrike

Ship Insurers Seeking Exclusions for US and UK Vessels from Red Sea Coverage

Ship Insurers Seeking Exclusions for US and UK Vessels from Red Sea Coverage

Sunak Wants To Descalate Red Sea Tensions

Sunak Wants To Desculate Red Sea Tensions

On today’s episode of what’s going on with shipping can we see proof of your War Risk insurance please I’m your host salir kagano welcome to today’s episode uh you know every time I think things are going to quiet down it’s going to get a little bit more peaceful when it

Comes to Oceanic shipping nope it gets crazier as it goes I’ve got a list of stories I want to go through with you get some context for what’s going on in and around the Red Sea right now a lot of developments since the last episode if you missed the last episode we talked

About seven big factors going toward containers and container shipping in 2024 sure to check it out right above there but this episode’s going to focus on the Red Sea and what has developed since then if you’re new to the channel hey take a moment subscribe to the

Channel and hit the Bell so you be alerted about new videos as they come out all right so first articles we’re goingon to be going through some gcap articles here for you from a variety of different sources this one’s a Reuters Red Sea attacks continue to disrupt

Global trade just a minute ago just checking online another attack just took place but what we’re seeing here is missiles being launched out of houthi control territory hitting this one on January 16th was a Target out of Yemen they hit a Greek owned bulker with a ballistic missile causing damage uh

We’re seeing attacks by ballistic missiles anti-ship cruise missiles and one-way drones these attacks while they’re not of the same scale that we’ve seen in the past are continuing meaning the houi are still able to interdict shipping heading their way going on with these uh stories this story by Barry Parker really

Interesting Red Sea crisis possibly the beginning of something bigger I got to say I I I don’t play conspiracies I don’t play that at all I really don’t however I teach a course in World War I where a series of small events led to a

Big war man you’re seeing a lot of small events happening right now and this is not a good thing we’re seeing attacks out of Iran to Pakistan to Iraq uh we’re seeing uh Ethiopia and Somalia uh Egypt has got issues with Libya on its West border it’s got the

Sedan issue on its Southern border we’ve got Israel and Gaza we’ve got a whole batch of issues that are destabilizing the region and the question is does this apply to a bigger issue we’ve got the Taiwan elections going on we’ve got low water on the Panama Canal this is a lot

Of issues all coming together and it’s all impacting shipping in a variety of different ways so let’s look at Focus right here on the Red Sea and what we’re seeing so first off the M CEO Vincent clerk came out in Davos the big meeting is going on in Davos didn’t get invited

Again another year to Davos I don’t understand had the private jet all warmed up ready to go it’s been running ever since because again I have to be climate efficient like everybody at Davos so didn’t get the invite but Vincent lerk said on Wednesday that the disruption to global Shipping caused by

The the attack will probably last at least a few months now he said that acting like he was sad about it but let’s be clear the shipping companies quietly are very happy about this they are putting their excess tonnage on these routes Freight rates are up

Through the roof these are all good for the bottom line of the container companies so while they’re talking about how bad this is in truth economically speaking this is going to be good matter of fact we just saw the economic Force for 2024 being changed for all the

Companies upward Zim marisk hop hog you name it they’re all forecasting going up from where they were originally Su Canal transits fall to the lowest level since the ever given grounding well since ever G given was Zero uh for six days I’m not exactly sure we’re there yet but it is

Falling and that’s basically the 7-Day average we’re seeing those levels come down this is from the IMF portat system this this is the chart that they have right here this is the chart for the past month goes back to 14 December back in 14 December you’ll see the 7-Day

Moving average was 76 ships a day going through a year ago it was 71 ships right around Christmas is where we saw the Divergence this was the attack uh on MK hongcha uh hung Joo excuse me hung Joo and that was the one that really triggered it and then you see the

Divergence here going below the average and what you see here as of January 14th the 7-Day moving average is 49 vessels whereas a year ago was 70 that’s a 21 ship Delta each ship going through the Su Suz on average half a million it’s probably more for these ships because

What we’re seeing is a lot of tonnage not going through if you change this over to volume you see the volume dip here volume dip on the 7-Day average was 4.6 uh million tons going through right now the 7-Day average is 2.8 million tons that’s a significant change and if

You look at the composition of the ships going through right now tankers are 14 cargo ships are 36 of the 49 going through we’re seeing more container ships go rerouting around the exception being Costco the Chinese overseas shipping is sending a ship infrequently through and then the other is CMA CGM

Because they’re using their French frig that’s in the area to escort that matter of fact the French navy just posted a tweet with four images of the French FR frigate escorting their ships through something the US Navy told me was not happening it is happening because the French navy confirmed it all right

Moving on here us confirms new military strikes after the houthis hit a bul caria this is after the attack on the Greek owned malti flag bulker but understand a US flag not US flag a US owned uh Marshal Island flag bulker the Gibralter um Eagle was hit a lot of

Jalter ships hit in jial Maris now jalta Eagle are hit Eagle is stationed up in or is headquartered up in Stanford Connecticut their vessel was hit so we’re seeing bulkers being hit now these are ships that carry bulk Commodities or grain you name it US Navy seizes Iranian weapons Bound

For the houthi so US Navy Seals operating off USS Lewis B po an expeditionary support base has been conducting operations boarding vessels on the high seas unfortunately this has led to the tragic loss of two US Navy Seals uh they were boarding a vessel one of the Navy Seals came off the

Embarcation ladder went into a water the other Navy SEAL jumped in with them understand uh while Navy Seals are trained divers and swimmers they’re encumbered by a lot of gear during a boarding operation uh full approved vest a lot of Weaponry you got to peel that

Off to float and if they didn’t get that off uh then that’s the problem plus you’re falling next to a ship you’ve got propellar you got all these issues and unfortunately uh we’ve seen the loss of these two Navy Seals but what they did find on the ship when the boarding took

Place was a lot of components and weapons for medium range ballistic missiles and drones so obviously Iran is is providing the weapons with the houthis we knew this already and there’s no doubt about this but here is more and more evidence plus we see Iran doing a whole series of

Attacks throughout the region they bombed Pakistan not too long ago they hit Iraq the other day so the Iranians are really stepping up their procedures uh there’s a report over from tanker trackers that the Iranians are finishing the first of their two drone carriers modified container ships these

Ships can launch and recover aerial drones uh that represents a whole new level of threat potentially out in the Arabian Sea or on the oceans in general so the Biden Administration has just redesignated the houthis as a terrorist group but not exactly they’re putting them in the minor league of terrorist

Groups they’re now what’s fall called a specially designated Global terrorist so uh the houthi or ansar Allah as they’re known has been designated under this this was a talk given by the National Security adviser Jake Sullivan up there but it doesn’t go in effect for 30 days

So if you’re the houie you have time to move assets money whatever you need to do because you know 30 days from now you become a terrorist that’s good to know so not exactly sure this is the deterrent he thinks it is because I don’t think it’s much of a deterrence to

Be put on the specially designated Global terrorists again not the a league not not the top League this is the kind of below them this is kind of the you know the the intraining terrorist group and then you have 30 days to move all your assets doesn’t seem strange

Meanwhile Mike Schuler wrote this piece U EU members State members State back new Naval mission in Red Sea so EU states have given initial backing to a naval mission to protect ships this sounds great until you look at the details here when you realize the objective was to establish it by

February 19th at the latest and make it operational soon afterwards in other words transition operation Prosperity guardian over to an Allied Mission with the goal of doing it by February 19th so a month from now we’re hoping to see the uh U uh European Union stand up and and

Take the role from the United States with us support still available not sure this is going to work moving on here on the cases uh chairman Z over in China steers China Navy away from the Red Sea risk so as the US and UK are launching these these strikes China finds itself

Sitting on the sidelines and again even though China Imports about half its oil from the Middle East and exports to the European Union China is not getting involved the 45th escort group is not doing any active convoying although we just saw three ships sailing in the Djibouti which are Chinese owned with a

Chinese Naval vessel uh not sure this was a convoy or just happened to be sailing in together uh the Chinese may be doing some escorting we’re starting to see an early indication of that but right now they would be escorting their ships they’re not talking about ES

Esorting other ships at this moment uh we’re seeing other ships begin to divert LG tankers liquefied natural gas ter tankers divert from the Red Sea as Qatar warns of escalation three countries on the planet are the biggest LG exporters United States Australia Qatar then Russia Qatar tends to export a lot of

Its LG to either Asia or the middle or to Europe principally after uh the natural gas pipelines were shut between Russia and Europe but now that natural gas from Qatar has to go or gutter has to go all the way around Africa to get to Europe there’s a finite number of LG

Tankers in the world expect to see LG Charter rates start going up expect to see the cost of LG begin to go up hopefully Europe has a nice warm winter like they had last year because if it’s a cold one energy is going to get expensive in Europe meanwhile Russian

Oil is still going through the Red Sea despite the houy missiles good to know the US and its Allied navies are on patrol guarding Russian crude oil as it goes through the area this is the irony of all this that us and European trade is being diverted around Africa but the

Trade that’s going through here is Chinese and Russian that’s what we’re doing we’re guarding Russian and Chinese trade now there’s other trade going through let me be clear there there is other trade going through but it is Russian Crew That’s benefiting from this remember Russian crew coming out of the

Baltic and the Black Sea they are meeting other tankers off of Spain and Greece consolidating into bigger tank tankers this is ship-to ship transfers they then come on these larger tankers through the Suz down the Red Sea through the bobel MB Frank uh and head over to the Middle

East to India to uh China to be refined into diesel fuel then loaded in other tankers and ship back to sell to uh European Union because this efficiency of the of the boycott against Russian oil is working so good we’re going to come back to that in a

Second Red Sea Insurance Soares after us strikes okay I have to ask what did the US think was going to be the result of the missile strikes no one who had any sort of competence did not think we were going to hit the houthis and be effective in hitting the

Houthis that’s not the question the question is what did you think was going to happen because what has happened is the war Risk insurance the added insurance you have to pay on your vessel has increased at the start of all this back when Galaxy leader was grabbed it was

0.2% it’s after that accelerated up to 7% they are now charging between 75 to 1% if you have a ship of a100 million 1% War risk is a million dollars and understand container ships can be valued from a 100 million up to a quarter of a billion

Dollars if this war risk continues to climb if it gets to black sea levels that’s 2 and 1 half to 3% if it gets to the rate it was during the height of the tanker war in the 1980s between Iran Iraq that was 7 to 10% it’s crazy

Amount we had to have known that the war risk was going to go and understand just because you have cut down the number of missiles that are flying from Yemen at ship and it’s significant the number I mean you had 21 missiles shot the day before they attack we’re now getting

Single missile launches it it doesn’t matter because the way the insurance companies price this is they go back to 2003 when the Yemen Yemen hit a tanker called the limberg and caused massive damage to that vessel massive fire near loss of the vessel uh it was nearly catastrophic that’s they go for their

Worst case scenario and even though you’re batting nearly 100% in shooting down drones and missiles only takes one to get through and that one that gets through it it has a catastrophic impact on the ship the insurance company has to pay it out and if you’ve ever dealt with

Insurance companies they’re it’s no different if it’s a shipping insurance company or a car or homeowners what insurance companies want to do is you pay your premium and them never pay you and most importantly they don’t want to have a huge payout they want to minimize

That payout no one wants to pay out for a loss of a containership with a quarter of a billion dollars worth of goods on board or a oil tanker with massive environmental impact or an LPG LNG tanker that can explode and kill who knows how many people they they want to

Minimize this so you can’t just throw missiles at the houthi and think this is going to solve it I know at the surface Naval Association Convention up in DC last week lots of high-fiving about the Mason and the Carney and all the Destroyers that are down there they

They’ve done fantastic the US Navy has done exemplary work same thing for the diamond and the French frig and the Italians and all the other navies that are there but you have to look at this commercially you have to understand that this is not a pure military issue it is

An economic commercial issue and if your result raises the war Risk insurance you have not helped in this scenario you’ve got to get the war Risk insurance down that’s the big issue that’s at play here right now this story bothers me more than anything else ship insurers seeking

Exclusions for us and UK vessels from Red Sea coverage so this is coming out of an insurance company called uh uh Marsh uh this is an underwriter who insures vessels and what they’re talking about here is that insurance companies may not provide War Risk insurance for

Us and UK ships not flagged but owned the US is the ninth largest owner of shipping in the world the UK is number 11 this is significant you’re talking about not being able to get War Risk insurance meaning us UK ships won’t be able to go through the irony is it’s us

UK ships that are protecting ships going through this region so we would not be able to sell a us-owned UK ship through an area defended by the US and UK navies instead who’s getting benefited from this it’s the Russians it’s the Chinese it’s everybody else it’s insane it’s

Crazy and Marsh let’s be clear is the same company that is underwriting the war Risk insurance so that Saudis can sell their million billion dollar yachts to Monaco to be at the Formula 1 races because it was a big fear that the Yachts wouldn’t be able to go from the

Persian Gulf up into the Mediterranean to be there so I’m not exactly sure we see this actually happened this is just one broker talking about it but it’s an interesting story if the other ones chime in on it finally this story so the prime minister of the UK uh Rishi Sak uh came

Out now the UK was the one country besides the US that participated in the strikes they brought four typhoon Fighters down from cyp a long freaking way to launch an attack he’s talking about this a coalition of countries gave the houthis a clear and unambiguous warning two weeks ago would uh uh he

Goes on any decision not to take action would weaken International Security and the rule of law further damage freedom of navigation and the global economy and send a dangerous message that British vessels and interests are fair game what he wants to do is kind of stabilize situation I think the British prime

Minister may be a good person to do this because the British understand not just military shipping but commercial shipping uh you have this is where Lloyd’s is a lot of the insurance companies are there this is a really good opportunity here to start kind of ratcheting this back down and I think

The British need to talk to the Iranians because the US can’t because of boycotts and issues between us and Iran they can’t talk the British can talk to Iran uh whereas the US can’t and this may be the potential to start kind of deconflict this because understand if

This goes on longer there’s going to be problems if Egypt isn’t getting the economy from the Su Canal you could destabilize Egypt and if Egypt goes revolutionary that’s a big problem not only is it bordering Gaza but the Suez Canal it creates massive amounts of problems if if the remaining 70% of

Trade going through the Suz can’t go through anymore so we have a lot of issues that are at play here and that’s just a sampling of news that I looked at I could have given you another dozen articles and relate them together we didn’t even talk about Panama Canal low

Water issues all these other issues that are floating around out there issues in South Africa with fuel down there Port Services you name it there there are tons but I wanted to give you this kind of snapshot of what is happening and why this war Risk insurance isn’t important

To talk about again go back into past conflicts if you want to see where the US and the and the Allies were winning in the ubot wars in World War I World War II you look at the insurance rates when the insurance came came down they were winning but they never eliminated

The war Risk insurance go back to the Civil War American Civil War what led American ships to PO the British flag it wasn’t the Alabama as much as I love the Alabama wasn’t the Alabama sinking 63 Union ships had nothing to do with it it was the escalating War Risk insurance

And the US failed to underwrite that war Risk insurance to provide a a a Avenue by which US shippers could get cheaper War Risk insurance the cheapest way to mitigate the war Risk insurance was to fly the British flag because the US fighting of the Commerce Raiders was to

Send out ships and try to find them needle in the Hy stack that didn’t work we need to come up with a solution to fix this problem in and around the redc I hope you enjoyed today’s episode if you did hey take a moment subscribe to

The channel and hit the Bell so you’d be alerted about new videos as they come out leave a comment share it across social media give it a big thumbs up and if you can support the page how do you do that you hit the super thanks button

Down below below or head on over to patreon where you can become a monthly and yearly subscriber so that I can basically fuel up my jet waiting to take me to Davos I have no jet I nothing they’re pointing to a wall right now there’s nothing here uh or you can help

Me stock up for my War Risk insurance when I bring my canoe through the Red Sea as part of what’s going on with shipping on location reporting until the next episode this is s signing off