Saudi Arabia Weighs State-Backed Insurance Plan to Boost Regional Shipping

Riyadh is considering a state-backed war-and-political-risk insurance scheme to cover ships operating in the region, as maritime attacks by Iran and its proxy groups have increased shipping costs.

The Saudi Finance Ministry has held talks with brokers in London on the issue, according to the Financial Times. The potential scheme comes after months of attacks, particularly in the Strait of Hormuz, where shipping has dropped from over 100 vessels per day to single digits.

Insurance agencies have raised prices and restricted coverage for vessels, infrastructure, and cargo due to the increased risk. Some insurers have refused to cover ships planning to cross vital waterways in the region, including the Red Sea, where Saudi Arabia has redirected much of its oil exports.

The cost of shipping in the region has grown drastically, with war risk premiums increasing from 0.25% of hull value to between 3% and 10%, according to Marsh. Iran seeks a fee of between 5% and 7% of cargo value, while Oman seeks around 3%.

Under the potential scheme, the Saudi Finance Ministry would offer cheaper insurance through a pool system, providing up to $186 million in commercial cover for each insured event. Reinsurers Saudi Re and Riyadh Re would lead a group of participating reinsurers, which could also include international firms.