Insurers also fear the Strait of Hormuz and the Red Sea... Saudi Arabia turns to state-backed war risk insurance for ships

[Financial News] Saudi Arabia is pushing to introduce ship war risk insurance that would have the state partially guarantee loss risks in order to protect its oil export routes.
According to the Financial Times (FT) on the 23rd local time, the Saudi government recently met with officials from the British insurance industry to discuss introducing ship war risk insurance, under which the state would share part of insurers' loss risk in wartime or during political crises.
The report said insurers were discussing a plan to form an insurance pool to reduce shipping companies' premium burdens and to cover up to $186 million, or about 231.5 billion won, per incident in the event of actual attacks such as ship seizures or missile strikes. Under the plan, private insurers and reinsurers would provide the initial coverage, and if losses exceeded a certain level, the state-owned Saudi Export-Import Bank would activate a backstop mechanism to provide hundreds of millions of dollars in additional funding.
The exact scale of the Saudi government's risk-sharing commitment is still under discussion. One source added, "Depending on the negotiations, the two sides may fail to reach a final agreement."
Recently, Saudi Arabia has faced major disruptions to oil exports because of tensions in the Strait of Hormuz stemming from the war with Iran and threats in the Red Sea from the Iran-backed Houthi militant group. Insurers have begun classifying Saudi-linked ships as high-risk assets, sharply raising premiums for Saudi vessels and cargo or limiting related coverage. FT reported that after passage through the Strait of Hormuz was restricted, some insurers at Yanbu port on the Red Sea, which has emerged as a key Saudi export hub, even refused to sell ship war risk insurance at all.
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