Chinese-owned commercial ships receive deep discounts on their insurance when sailing through the Red Sea, another sign of how punishing Houthi attacks in the region are on the commercial interests of ships with ties to the West.
The militants began pursuing ships linked to Israel in mid-November, before expanding their targets to include American and British ships last month, when the two countries bombed Yemen in an attempt to suppress militant attacks. These incidents led to the emergence of a multi-tiered insurance market, with insurance companies charging different rates to covered shipping companies.
While the overall picture is mixed, some China-linked ships are having to pay at least 0.35% of the value of their hull and machinery to obtain transit insurance, according to people involved in the market, who said that most ships pay between 0.5% and 0.75%. , although this may vary greatly.
The reduced rates will translate into savings of $150,000 to $400,000 for the transit of a vessel with a hull and machinery value of $100 million.
This means that Chinese shipping companies gain another advantage in addition to being able to use a shortcut between Asia and Europe relatively safely. Hundreds of ships avoid the region, sailing thousands of miles around Africa instead. Since the escalation of attacks, there have been no reports of serious damage to Chinese-owned ships.
The Houthis say they are doing this in solidarity with Gazans amid Israel's war with Hamas.
Insurance price jumps
War insurance rates, a requirement for passage through more dangerous waters, have risen since the Houthis first began their attacks.
After prices jumped nearly tenfold, they stabilized in recent weeks, as the nature of the risks threatening shipping in the region became clearer, while Western military forces were able to weaken the Houthis' capabilities.
The market reflects lower risks to ships associated with China and Hong Kong, as demonstrated by an increase in Asian-flagged cargoes transiting the region, said Monroe Anderson, chief operating officer at maritime war risk and insurance specialist Vessel Protect. However, despite the Houthis' declaration of safe passage, there are no guarantees that incidents of miscalculation can be avoided.
Although Chinese ships enjoy discounts compared to most of their counterparts in the market, some ships that connect to the US, UK and Israel have to pay more to get coverage.
Some insurers are still looking to exclude coverage for those vessels, but it is still possible for them to get all the insurance they need, market participants said.
Participants explained that the fact that some ships with US and UK ties continue to sail through the region is evidence of their ability to obtain insurance cover.
Some ships still advertise themselves as not associated with Israel, the United States, or the United Kingdom.
At least 27 ships sent destination statements on digital ship tracking systems stating that they were Chinese-owned, Chinese-crewed, or both.
The Houthis told Russian newspaper Izvestia last month that Chinese and Russian ships would be safe from attack, although that does not include cargo carried by the ships.
