• Home
• /
• Business

Soaring war risk charges to hit aid ships to Iraq

"Hull and machinery insurance has risen to 7.5-10 per cent (of vessel value)...that seems to be the going rate," a spokesman for a leading syndicate told Reuters.

Earlier, war risk premiums were around 3.5 per cent for calls to the southern Iraqi port of Umm Qasr.

The latest major rise in insurance rates means charges have risen 2,000 per cent from the 0.5-0.6 per cent hull value before the war began.

Leading insurers defended the increases, saying rates were applied according to the assessed risk.

"Rates are based upon the underwriter's fear that there will be losses - the idea isn't to make profits," one said.

In Rome, Age Erichsen, chief of the ocean transport service of the United Nations World Food Programme (WFP), said: "We are very concerned about the costs.

"At the end of the day, it is the donor that will suffer from it. Someone has got to absorb this. It won't be the ship owner because, if he had to pay it, he could risk bankruptcy."

Agencies are lining up dozens of vessels to take humanitarian relief into Iraq in what could become the World Food Programme's biggest ever aid effort. The increase in charges will undoubtedly hit that programme.

The first ship with humanitarian aid for Iraq docked at Umm Qasr on Friday, after mines had been cleared from major waterways. The British naval supply vessel, the Sir Galahad, was carrying 200 tonnes of food, water, medicine and blankets.

The rise in war risk costs has more than matched quoted charges during the 1991 Gulf War, when rates rose to around 5.0 per cent of the insurable value of a vessel.

"This is remarkably high considering we haven't even had a war loss yet. They are already higher than the last Gulf War, but then ships were sunk," shipping newspaper Lloyd's List industry editor David Osler told Reuters.

"It seems to be that the London insurance market is getting the jitters in what could turn out to be a long war."

At current quotes aid agencies would have to fork out an additional $2 million assuming agencies used a modern $20 million cargo vessel, Osler said.

"And that's even before you start thinking about the cargo."

The insurance spokesman said cargo insurance rates had also risen to 5 per cent of the value of the goods to be transported. He could not immediately say what going rates were before the war began.