Red Sea Shipping Costs Climb as Insurers Raise War-Risk Premiums

By Maria Kalamatas | July 21, 2025

Section: International / Maritime & Risk Management

Dubai, July 21 — Shipping companies navigating the Red Sea are seeing insurance bills surge as underwriters respond to recent security incidents near key choke points, prompting warnings that trade flows in the region may become significantly more expensive.

“In the past month, we’ve watched premiums rise by as much as 80 percent on some routes,” said Karim Al-Farsi, regional director at a Dubai-based bulk carrier line. “Even vessels with escorts and advanced tracking aren’t exempt — everyone is paying more.”

Security fears driving the jump

Several attempted attacks on commercial vessels near the Bab el-Mandeb Strait in recent weeks have triggered a wave of caution among insurers. Operators say war-risk surcharges now apply broadly, regardless of a ship’s security measures.

“It’s not about whether you’ve been targeted; it’s about the perception of risk,” Al-Farsi explained. “That perception alone is pushing costs through the roof.”

Ripple effect on trade

The Red Sea remains a central corridor for cargo moving between Asia, the Gulf, and Europe. For exporters of high-value or perishable goods, rerouting around Africa isn’t a practical alternative, even though some companies are starting to explore that option.

“Adding two extra weeks via the Cape of Good Hope can ruin the economics for fast-moving cargo,” said Lina Haddad, senior analyst at Gulf Trade Advisory. “But for some bulk shipments, that detour is starting to look like a safer bet.”

Carriers seek workarounds

Larger shipping firms are negotiating collective insurance packages to soften the impact and working with regional authorities to enhance naval patrols. Some are grouping voyages into informal convoys to share security resources.

“Collaboration is the only way to keep these routes viable,” Al-Farsi noted. “If costs keep rising unchecked, smaller operators will be forced out of the market.”

Uncertain outlook

With peak export season approaching, many carriers worry the Red Sea could become one of the most expensive maritime corridors globally by late summer. Analysts say insurers will keep surcharges elevated until stability improves.

“For now, the trade is still moving,” Haddad said. “But the margins are thinning fast, and that tension can’t last forever.”

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