Israel has been shocked by a decision from giant insurance companies to suspend insurance coverage for its ships in the Red Sea, raising concerns in Tel Aviv about the possibility of attacks amid escalating regional tensions. In an unprecedented preemptive move, global insurance companies now view Israeli ships, like their American and British counterparts, as potential targets for attacks in the face of escalating tensions in the region. This has forced them to withdraw insurance coverage for these ships on journeys through the Red Sea.
Sources reveal that this decision could cause a significant disruption to Israeli maritime trade, with shipping companies facing exorbitant costs as ships are forced to change their routes. There is growing Israeli apprehension about the worsening crisis.
The Israeli newspaper "Globes" uncovered the critical predicament facing the Israeli commercial shipping fleet due to the restrictive decisions from global insurance companies. Following the suspension of coverage for its ships, Israel now faces two difficult choices: either taking expensive alternative routes around Africa, adding an extra two weeks to the journey, or using intermediary ports in the Mediterranean for cargo transshipment, which implies more effort and costs. The newspaper warns of severe negative repercussions on the Israeli economy, with insurance premiums skyrocketing by over 1000% from previous levels.
The dispute among global insurance companies over the perceived risk to Israeli ships in the Red Sea amid current tensions is escalating. While a senior official at Marsh acknowledges the tightening of the insurance market for these ships, a high-ranking official at Britz denies the actual withdrawal of coverage. However, concerns remain significant about the possibility of attacks on these ships, putting insurance companies in a real dilemma: either raise exorbitant premiums or completely cease providing coverage. Additionally, these ships face other risks if they take alternative routes around Africa, exposing their cargo to damage after weeks of extended navigation.
Exacerbation of the Global Logistic Crisis
The impact of the paralysis of shipping routes in the Red Sea, a vital artery responsible for 12% of global trade, is worsening despite the increasing US and British strikes against the Houthi movement. The crisis, initiated by Houthi attacks on Israeli ships in retaliation for Gaza, shows no imminent resolution, according to the Israeli site "Calcalist." Shipping companies continue to avoid these "dangerous" routes in the Red Sea despite the exorbitant costs.
Experts fear the crisis's cascading effects, affecting entire sectors from the automotive industry to the world of fashion. Can the United States and Britain succeed in regaining control of maritime shipping routes?
Threatening Global Economies
The ramifications of the crisis in maritime shipping in the Red Sea are expanding, with several industries now at risk of faltering amid an uncontrollable "chaos," according to shipping experts. Over 2400 ships have altered their routes to circumnavigate Africa instead of the Red Sea, leading to increased fuel and insurance costs and doubling the duration of a single journey to seven weeks, compared to the previous five. Simon Haynie, an expert at the British company Drewry, warns of widespread chaos in all sectors dependent on maritime shipping, as customers will be unaware of their goods' arrival times, resulting in significant losses and profit contractions.
Shipping Crisis Threatens Strategic Sectors
The damages resulting from the Red Sea crisis are spreading, with strategic sectors such as automotive and clothing experiencing severe losses due to disrupted supply chains. Tesla has warned of a two-week production halt at its factories in Germany due to delayed input arrivals. Investment companies have reduced their exposure to the automotive sector, which has seen a 5% sales decline, according to Bloomberg estimates. The fashion sector fears nearly zero sales this year, according to warnings from the British company Next. At the same time, central bank governors warn of rising inflation rates and the deferral of plans to lower interest rates, which could ignite an unprecedented global economic crisis.
