Insurers Rate Persian Gulf Risks
By Michael Ha
NU Online News Service, March 20, 3:30 p.m. EST?How high war risk insurance rates climb for maritime business in the Persian Gulf region depends on how close oil tankers and cargo ships come to the conflict zone, market participants said
In recent days, oil tankers and cargo ships operators have been notified that war risk coverage for aircraft and shipping in the Middle East would be cancelled with a two-day notice as the military conflict starts, said Robert Hartwig, senior vice president and chief economist at the Insurance Information Institute in New York.
The coverages are usually reinstated, but, predictably, at higher prices, Mr. Hartwig said.
"At the top of the Persian Gulf, there would be much higher rates," said Marcus Baker, managing director for marine and energy division at Marsh in London. "The closer you get to Iraq, the more you would have to pay," Mr. Baker said.
While Mr. Baker mentioned a jump of 15-to-20 percent for war premiums for shipping operations in the Middle East, Martin Reith, chief executive officer of London-based Ascot, which manages a Lloyd's syndicate, cited an increase of up to 100 percent for some insureds.
"Certainly, Lloyd's is the focal point for providing the war risk coverage. As of this moment, if you wish to travel to the northern Persian Gulf, the rates are really on an application basis. You will need to tell us where you are going, why you are going there, and how long you will be there for," Mr. Reith said.
"Typically, in the Persian Gulf, there is a 50-to-100 percent increase for the war premium, even just for one voyage."
But Mr. Baker added that cancellation notices and rate hikes during times of war is nothing out of the ordinary.
"Absolutely, there is nothing unusual at all. It is totally in line with what generally happens during times of war. At Lloyd's, there is a war committee that reviews the situation pretty regularly," he said.
The war can also provide extra opportunities for Lloyd's, which is also the biggest market for the war risk coverage on land.
John Eltham, director at Miller Insurance Services, a big London insurance broker, told National Underwriter that, within hours of the first U.S. strike in Baghdad, his firm had received instructions to bind a war risk in Iraq for a western company that has operations in that region. "It covers physical damage, business interruptions and abandonment if your company has to leave all the belongings in the territory," Mr. Eltham said.
Another war risk coverage is for personal accidents, he added. "That covers individuals against theft caused by war– and there are already some claims coming into the market," he said.
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