War Risk Insurance for Red Sea Tankers Hits 1% of Hull Value

War risk insurance premiums for oil tankers transiting the Red Sea surged to as high as 1% of hull value for a seven-day transit in 2024 -- up from near-zero before the Houthi attacks began. For a typical Suezmax tanker valued at $60-80 million, this translates to an additional $600,000-800,000 per voyage just for the war risk surcharge. Even after the January 2025 Gaza ceasefire brought premiums down to around 0.2-0.5% of hull value, costs remain orders of magnitude above pre-crisis levels. And premiums spiked right back to 1% when Houthi attacks resumed in mid-2025. These insurance costs don't stay with the shipowner -- they get passed through to charterers, then to oil traders, then to refiners, and ultimately to consumers. S&P Global reported that oil importers face costly tanker insurance 'despite fall in Red Sea attacks,' because underwriters price risk based on capability and intent, not just recent attack frequency. The Houthis have demonstrated both, so premiums remain elevated even during lulls. Container ships pay less than tankers for the same transit because tankers carrying flammable cargo present a categorically higher risk of catastrophic loss. The insurance market dysfunction goes deeper than premiums. Some underwriters have introduced coverage exclusions for Red Sea transit entirely, meaning certain vessels cannot obtain war risk coverage at any price. This creates a two-tier market: well-insured vessels from major shipping nations that can absorb the cost, and shadow fleet or smaller operators that transit without adequate coverage, increasing the risk of uninsured environmental disasters. The legitimate insurance market is effectively subsidizing risk that should be priced into every barrel of oil transiting the region. This problem persists because the insurance industry prices risk retrospectively and regionally, but the threats are dynamic and asymmetric. There is no international mechanism to pool war risk costs across the global oil supply chain, no government backstop for maritime war risk the way aviation has post-9/11 terrorism insurance programs, and no way for individual underwriters to accurately price the probability of a drone strike on any given vessel on any given day. The result is volatile, punitive pricing that distorts trade flows and penalizes the most important energy transit corridor in the world.