Insurance, Freight Costs to Rise on Saudi Attack

Insurance, Freight Costs to Rise on Saudi AttackInsurance, Freight Costs to Rise on Saudi Attack

The latest attack on Saudi oil installations will push up the war risk insurance, thereby increasing the total cost of deliveries as freight rates also have an upside potential amid likely change in the pattern of trade flows, market participants said Monday.
"An incident of this scale would, although not directed at maritime assets, most likely have an impact on the additional war risks premiums," Svein A. Ringbakken, managing director, Den Norske Krigsforsikring for Skib, or DNK, told S&P Global Platts. 
It is the world's largest provider of maritime war risk cover, insuring over 3,000 ships for more than $217 billion.
At any given time, between 30 and 40 ships operating in the Middle East region are insured by DNK.
"The biggest headache is the Additional War Risk Premium (AWRP), higher numbers will now be quoted by the insurers," said a senior executive of a Middle Eastern tanker owner.
He pointed out that unlike crude prices, which are in the public domain and change by the second, AWRPs are negotiated privately and vary from ship to ship, depending on age and notional value.
Until recently, some owners did not mind having a higher value recorded for their ship, with an eye on the secondhand sale market. However, this now implies coughing up a higher amount as AWRP.
While owners are striving to pass on the AWRP to charterers, they are resisting and contending that beyond a specific amount, it should be shared by both.

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