Sinopa incident may drive up insurance rates

Against a backdrop of heightened tensions in the Middle East, the damage to Iranian oil tanker Sinopa may drive up insurance costs in the region, experts have warned. Events leading up to and surrounding the incident are shrouded in uncertainty, with various reports of missiles striking the tanker and an accusation that Saudi Arabia had committed an act of terrorism while the vessel was carrying oil to Syria.

Whilst the subsequent oil spill was brought under control and the crew was reported to be safe, head of marine and trade at DWF, Jonathan Moss says this latest incident will lead to a further increase for insurance rates in the politically tense region.

"Marine insurance, cargo and hull and machinery cover incorporating war risks, is uncontrollably linked with geopolitical conflict," he said. "This latest incident will drive insurers to raise further war risk insurance rates for vessels operating in the region, over and above the tenfold increase to rates since the attacks on tankers in May. Shipping companies operating in the region will be forced to absorb these added costs with affordable insurance in this high risk zone becoming harder to find. This could lead to cost-cutting measures in other areas of maritime trade.

"Whether this was an act of terrorism or indeed a breach of international sanctions is of crucial significance in determining whether and how cover might respond, if at all," Moss explained. "What is certain, however, is that the continued instability and unpredictability in the region will have an adverse effect on sea trade, will reinforce the argument that the UK has too few naval assets to protect its interests in the area, and will add to the growing trend of increasing marine insurance premiums."

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