Carriers to Levy War Risk Surcharges

As tensions continue in the Middle East around the Israel-Hamas war, some international shipping carriers are levying war risk surcharges on several trade lanes traveling through the Red Sea and eastern Mediterranean.

Last weekend, three commercial vessels were attacked with ballistic missiles fired by Yemen’s Houthi rebels indicating the wide scope of the war in the region. AP News reported that global shipping has increasingly been targeted as the Israel-Hamas war threatens to become a wider regional conflict.

It is possible this surcharge will come into effect as of Jan 1, 2024. It is very likely other carriers will follow suit as well.

A war risk surcharge is only applied when insurance underwriters designate specific zones as war risks. It covers actual invasions and insurrections, events that may escalate toward war and any area where hijacking is prevalent. The surcharge is levied to recover potential extra costs, such as re-routing or additional security.

The Suez Canal

The Suez Canal is a vital waterway running north-south across the Isthmus of Suez in Egypt connecting the Mediterranean and Red Seas. It is a critical transit point on trade lanes connecting Asia with Europe and linking Southeast Asia and India with the US East and Gulf coasts. It is the shortest route and therefore, one of the world’s most heavily used shipping lanes.

“The war risk surcharge will affect many of our customers because of the major use of the Suez Canal thruway. We will have a hard time avoiding it,” said Tom Peacock, President of Worldwide Logistics Group.

Potential Delays

The deteriorating security situation in the Middle East region is causing carriers  to divert or withdraw ships from the area. Route diversion could result in delays as long as a week or more from the initial delivery schedule.

“Safety is our number one concern with our logistics partners as they seek to reduce potential exposure to terrorist action,” said Peacock. “We’ll do all that we can to communicate changes as they develop.”

For more information about war risk surcharges or potential delays in shipping, please contact your Worldwide Logistics sales representative.