Exclusive: Saudi ship struck by Houthis had insurance from Lloyd’s insurance giant
Insurance giant Gallagher had insured one of two ships that were attacked by the Houthis in the Red Sea, which caused a fire to break out on board and made the ship return to port.
The Lloyd’s of London broker had organised cover for the affected vessel, which was one of a pair of tankers to be hit by the Iran-backed militia in last week’s escalation of the Middle East conflict, two people familiar with the matter told CityAM. The blockade now means Saudi Arabia is blocked from exporting oil into the Arabian Sea via both the Red Sea and the Persian Gulf.
Focus on the Iran war has largely been restricted to the chokehold Tehran has had over the Strait of Hormuz, the vital Persian Gulf shipping lane through which over a fifth of oil and gas passed before the war.
The Iranian regime has installed a blockade across the passage for much of the past five months, preventing its Middle Eastern neighbours from the oil exports that remain the lifeblood of their once-booming economies.
But in a dramatic escalation this week, the Houthis – an Iran-backed militia that operates in Yemen – launched a similar barricade for Saudi ships in the Red Sea’s Bab al-Mandab strait. On Wednesday, the guerilla group carried out missile attacks on two separate tankers attempting to bypass the blockade, with Saudi state media confirming one vessel caught fire after the attacks.
Red Sea blockade sparks oil price surge
Gallagher is one of the so-called Big Five brokers that dominate the industry’s maritime and cargo sectors. The New York-listed group did not underwrite the policy on the attacked ship, meaning it is not facing a hefty payout. CityAM understands the broker will still provide all vessels with cover in the Red Sea should ship owners choose to try and bypass the blockade.
The Houthis’ actions means the Suez Canal, which runs through Egypt into the Mediterranean Sea, is now the only avenue through which Iran can export its vast oil production, hampering the huge volumes of trade it did with the likes of India and Pakistan.
Oil prices have spiked dramatically on the continued escalation, rising as much as 16 per cent between Monday and Thursday. Brent crude peaked at $102 a barrel before falling through Friday.
James McCormick, research director at Cavendish, said the Houthis’ move represents a major blow to Saudi Arabia’s oil and gas export capacity. The petrostate had been using a vast pipeline to reroute oil from its east coast to the Red Sea to avoid Iran’s Hormuz blockade, which is itself now hemmed in by the Iranian ally.
“The market is increasingly pricing a broader kind of logistic delivering supply shock,” he told CityAM. “At the moment this is keeping Brent vulnerable to sustained trading over $100 a barrel.”
A spokeswoman for Gallagher said: “Whether transit is safe is a decision is made by the master of the ship and associated parties. As a specialist marine insurance broker our role is to provide cover to ships looking to travel in the area and Gallagher is able to provide insurance for ships travelling in the red sea and other high risk areas.”