Shipowners who cross Bab el-Mandeb now pay several kinds of insurance, not one Red Sea price. Reporting that cites Reuters insurance sources and The Insurer said marine war-risk insurance for the strait stayed near 3 percent of vessel value in early September, even as attacks intensified. The same reporting said political violence and terrorism cover tightened, and premiums for higher-risk policies approached 10 percent as underwriters accepted fewer risks.
The 3 percent figure does not show that the Bab el-Mandeb route is safe. Two marine underwriters quoted in the same reporting said current war-risk pricing rests on a thin sample of ships that still transit the strait. They said fewer ships now use the route, and that small sample distorts pricing. A stable published rate can hide other costs. Ships take longer routes around the Cape of Good Hope, cargo arrives late, and freight costs rise for goods that still reach Horn ports. Ethiopian importers and exporters already face hard-currency scarcity, and they face those freight and delay costs in shops and factories.
Demand rose for political violence and terrorism insurance as Houthi attacks on Saudi-linked shipping and other Red Sea targets widened the area insurers treat as risky. Insurers became more selective about who gets a policy. Reporting said premiums near 10 percent for higher-risk policies could leave some owners unable to buy cover, even if they were willing to pay. That pushes more cargo to the Cape route and reduces commercial traffic in the southern Red Sea. Lloyd’s said it expects about $1.88 billion in conflict-related losses tied to the wider fighting in the Middle East.
Reporting linked to the same September insurance story said Saudi Arabia moved larger crude volumes through Oman’s Port of Sohar after drone damage disrupted the kingdom’s main oil pipeline route toward the Red Sea. The East-West pipeline, which can serve as an alternative route to Hormuz, also faced closures after earlier drone strikes. When Saudi crude leaves through Oman instead of Red Sea terminals, insurers still treat Bab el-Mandeb as a high-risk transit.
Djibouti still handles the bulk of Ethiopia’s seaborne trade. Berbera competes for cargo from shippers who want another port option. While Bab el-Mandeb stays in the high-risk category, charterers and cargo owners keep checking Cape routes, and extra costs for fuel, time, and insurance add to consumer prices from Addis Ababa to Nairobi. Abiy Ahmed’s government keeps talking about sovereign Red Sea access as a national project. At the same time, marine war-risk sits near 3 percent, and reported terrorism premiums climb toward 10 percent while underwriters limit cover.
Cape diversions still add major costs to Red Sea trade for many cargoes. Horn freight pays those costs through delayed containers and more expensive imports. Traffic has not returned to earlier levels, and underwriters have not widened cover again.
Sources:
Businessmen Middle East Reuters (July war-risk context) World Ports Organization AInvest analysis of Bab el-Mandeb premiums and Cape freight