The cost of insuring commercial vessels transiting the Red Sea has skyrocketed following a sharp escalation in attacks by Yemen’s Iran-backed Houthi militants, threatening further disruption to global trade flows. According to a report by the Financial Times, premiums for war risk coverage have surged to as much as 1% of a vessel’s total value — more than doubling since the weekend.
The world’s largest insurance broker, Marsh McLennan, confirmed the spike, with Marcus Baker, the firm’s head of marine and cargo, describing the situation as “stranger than I’ve seen before.” Prior to Sunday’s attack on the Greek-owned cargo ship Magic Seas, war risk insurance premiums stood at around 0.4%. The sudden escalation means that insuring a $100 million ship now costs as much as $1 million per voyage — up from roughly $300,000 just days earlier.
“There seems to have been a very quick escalation in activity from the Houthis,” Baker told the Financial Times, warning that rates could rise further if ships continue to transit through the corridor rather than diverting around Africa’s Cape of Good Hope.
The Magic Seas, a dry bulk carrier owned by Greece’s Stem Shipping, came under heavy fire on Sunday, reportedly hit by gunfire, rocket-propelled grenades, and maritime drones. The Houthis later claimed responsibility, stating the attack was in retaliation for the vessel’s alleged violation of a ban on docking at Israeli ports.
Just a day later, the Eternity C, another Greek-operated vessel flying the Liberian flag, was also attacked — this time by sea drones and speedboats firing grenades. While the Houthis have not officially claimed the second assault, Reuters reported that three crew members were killed.
In response, Israel launched retaliatory strikes on Houthi-linked infrastructure, including ports in Hodeidah, Al-Salif, and Ras Isa, as well as a power station. The Israeli Defense Forces (IDF) also claimed to have targeted the Galaxy Leader, a ship previously seized by the Houthis in their first maritime attack in November 2023. According to the IDF, the vessel had been retrofitted with radar technology used to track international merchant ships for “terror operations.”
The Red Sea remains one of the world’s most critical maritime chokepoints, connecting Europe to Asia via the Suez Canal. Any sustained rise in maritime violence could have far-reaching consequences, from pushing up oil prices to delaying the global delivery of goods.
With the Houthis vowing continued resistance and global insurers adjusting to heightened risks, shipping companies are once again being forced to weigh the cost of safety against speed and efficiency — a dilemma reminiscent of early 2024, when similar attacks led to widespread rerouting.
As Baker warned in his interview with the Financial Times, “It is expected that these rates move further upwards if shipping continues to use the corridor for transit.”
