New Delhi: Freight carriers will have to pay an additional premium to restore war cover for shipments passing through high-risk areas amid the escalating crisis in West Asia, experts said.
Vessels of the Shipping Corporation of India (SCI) are also involved in the movement of crude oil and LNG, especially through areas around the Red Sea, and would have to pay an additional premium for war cover to ensure risk cover.
“It is reasonable to expect that Indian oil companies will have cargo exposures and SCI will have hull exposure in this region. Oil prices are also likely to face upward pressure in the near term,” Policybazaar Head (marine insurance) Balasundaram R said.
According to Prudent Insurance Brokers Head (marine specialities), Gaurav Agarwal, notice of cancellation of war cover has been issued on hull on March 1, and a similar cancellation on cargo is expected soon. After this cancellation, Agarwal said, the insurers may increase premiums on hull and cargo.
“If the conflict becomes a serious war risk, insurance premiums for ships are likely to go up, and insurance companies may adjust pricing quickly based on the risk level. Since cargo insurance premium is calculated based on cargo value, the total premium amount may go up, even if the rate stays the same,” he said.
However, he said, unless the conflict becomes long and widespread, a major overall increase in insurance premiums across the board is unlikely.
Experts further said shipment or cargoes that have already sailed from India are anchoring in international waters, are waiting for the situation to ease out, and alternate routes are being worked on by shipping lines, which will add additional cost to the importer/exporter.