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A cargo ship sunk by Houthi militants on Monday could face tens of millions of dollars in uninsured losses, after setting sail without war risk cover added to its policy from one of the world’s largest marine underwriters.
US-based Travelers did not extend war risk cover to the Greek-operated bulk carrier Eternity C before its fatal Red Sea passage, multiple people familiar with the matter said, leaving the ship’s owners exposed to losses after a missile attack sank the vessel and killed at least one crew member.
While prices for such cover have risen sharply, in this instance Travelers denied cover because of heightened risks, one person with knowledge of the matter said. Travelers did not respond to requests for comment.
The sinking comes as a spate of attacks by Iran-backed militants in the Red Sea — a critical artery for global shipping — have driven up insurance costs and threatened to disrupt the flow of goods.
The cost of extra war risk premiums for travelling through the Red Sea has more than doubled, the Financial Times previously reported, after the latest attacks by Houthi militants on commercial vessels.
The Liberian-flagged Eternity C was insured by Travelers with a baseline “annual war risk” policy, market participants said. But the ship sailed through the Red Sea without additional war risk cover required for hazardous areas after being denied coverage from its insurer.
That could leave the vessel’s owners and operators exposed to the damages for the loss of the vessel. The ship is managed by Cosmoship Management. The registered owner, Guildford Navigation, gives Cosmoship as its correspondence address. Market participants estimated the ship’s value to be $15mn-$20mn.
Cosmoship declined to comment. The operator on Thursday confirmed the attack on the carrier.
Shipowners with vessels entering areas, such as the Red Sea, designated hazardous by the Joint War Committee of Lloyd’s and other London insurers must offer prior notice to their insurers, giving underwriters the option to charge additional premiums, or deny cover altogether.
Lloyd’s List, which has provided shipping news from London since 1734, had previously reported that the vessel had been denied cover by its insurer.
Since the Houthi attacks resumed in the Red Sea following the start of the war between Israel and Hamas, scheduled vessels such as container ships and car carriers have largely deserted the Suez Canal route between Asia and Europe. Instead they have taken the far longer journey around the Cape of Good Hope.
