Israeli insurers are charging lower rates for war risk coverage for cargo ships going into Israel than the London market, Aon brokerage reported.

Chicago-based insurance broker Aon said the cost of additional premiums charged by London for cargo ship war coverage has tripled in some cases.

Aon's London office said in a report that during the fighting between Israel and the Lebanon-based militant group Hezbollah, Israel's port of Haifa has more or less closed with cargo ships being diverted to Ashdod.

Aon said the Israeli insurers have a valid point in their evaluation of the risk because the conflict is only taking place in the north, miles away from the port of Ashdod, which is south of Tel Aviv.

However, lack of precision targeting in Hezbollah rocket attacks and continued conflict means that underwriters are erring on the side of caution, Aon said, noting that London sees Israel as an enhanced risk.

Additional premium war risk rates are nevertheless inconsistent, which is good for the cargo owner who can shop around for the most competitive rate for the required coverage, Aon pointed out.

An additional premium for shipments can cover both war risks and strikes, the latter including terrorist activity, thus ensuring protection for the cargo owner regardless of whether this conflict is deemed war or a terrorist activity by the underwriter.

The standard additional premium for a country such as Venezuela sits at a rate of about .05 percent of the cargo's value, Aon said. But for Israel, deemed an elevated risk, cargo owners can expect their premiums to fetch up to 15 percent.

"As Haifa is closed, there's double the traffic trying to sail via Ashdod, leading to congestion and some vessels being diverted to Cyprus, for example," pointed out Stephen Garrard of Aon Marine's cargo team. Even though cargo may not suffer a direct hit from the rockets, owners should recognize that these delays are in turn leading to increased exposure while goods are in temporary storage waiting to travel via the port.

Aon noted that cargo owners who have taken block annual war policies would not be subject to additional premiums, but those looking for one-off covers, or needing to pick up insurance partway through a journey, will need to be prepared for the increased rates.

In its report, Aon advised that cargo shippers should try to ensure that vessel owners do not terminate contracts before final destinations are reached. The ship owner could decide to discharge the cargo at an alternative port, such as Cyprus, saying the vessel has traveled as far as it can without becoming entangled in the conflict or the congestion at Ashdod. In this case, the cargo owner may immediately find they are without any cover and an additional premium may have to be paid to follow the cargo through to its final destination on a new vessel, the report said.

Art caption:

Special Reports /

London, Israeli Insurance Markets Diverge On Middle East War Cargo Cover

Related Stories

Recommended For You