Recent developments have heightened risks for commercial shipping in the Middle East. Ansar Allah in Yemen has reportedly expanded its targeting criteria in the Red Sea to include Saudi linked vessels, while in a separate development, the London insurance market has introduced a new hull clause that terminates cover for vessels making transit payments in the Strait of Hormuz.

Impact on cover or operations

After the Ansar Allah movement in Yemen announced a ‘maritime embargo’ on Saudi Arabia, the group stated the action was a response to a reported Saudi blockade of ports and airports in Yemen. This development marks a significant expansion of the group’s declared targets, which previously focused on vessels with perceived connections to Israel, and later to the United States and the United Kingdom following coalition air strikes in the region.

The primary impact for Members is the tangible widening of risk to commercial shipping in the Red Sea and Gulf of Aden. Open sources have subsequently reported attacks on at least one Saudi tanker and that other vessels trading with Saudi ports have altered course to avoid the area. Previously, owners and operators with no links to Israel, the US, or the UK may have assessed their transit risk as lower. Now, any vessel with a demonstrable connection to Saudi Arabia, including trading history, port calls, ownership, or chartering interests, faces a direct and stated threat. This will affect both voyage planning and insurance arrangements.

The physical risks demonstrated since late 2023 are severe and Houthi attacks have resulted in the sinking of two vessels, the seizure of a third, and the deaths of four crew members, creating clear exposures for both Hull and Machinery and Protection and Indemnity covers.

In a separate development affecting another critical regional chokepoint, the insurance market has moved to clarify the position on transit payments in the Strait of Hormuz. According to sources, the Lloyd’s Market Association (LMA) has published a new model clause for marine hull underwriters regarding payments made for transit through the Strait. The clause clarifies the insurance position where a payment, financial or otherwise, has been made to facilitate a vessel’s passage through Iranian territorial waters.

The clause is designed to address concerns over potential breaches of sanctions and terrorism legislation in the US, UK, or EU where an insurer is, or ought reasonably to be, aware that an insured has made such a payment. Under its terms, insurers will not cover the payment itself. More significantly, where such a payment has been made, the hull cover for the vessel ceases entirely. This is intended to provide a clear contractual position and evidence an insurer’s due diligence and compliance.

Recommended action

Members should review all planned voyages in the southern Red Sea and Gulf of Aden, with particular scrutiny for any vessel or cargo having any connection, however indirect, to Saudi Arabian interests. The declaration of an ’embargo’ suggests a broad interpretation of what constitutes a valid target.

In addition, Members whose vessels transit the Strait of Hormuz should review their hull policies to determine if the new LMA clause or similar wording has been incorporated. It is critical to understand that any payment made to facilitate transit could not only expose the Member to sanctions risks but may also terminate the vessel’s hull cover at a point of high physical risk. Members should establish clear protocols to prevent such payments from being made.

A dynamic and thorough risk assessment should be conducted for every transit in these regions. This assessment must include confirmation that appropriate war risks cover is in place before entering any listed area. As targeting logic and contractual terms can be fluid, Members should exercise enhanced due diligence on a vessel’s recent trading history and the full ownership and management chain. Members are strongly advised to contact the Club for the latest guidance on risk mitigation and to understand fully the implications for their cover.

Product coverage: Relevant to Members insured for Cross-class/General.

This publication is issued by The Swedish Club for general informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice, and should not be relied upon as a substitute for advice from qualified professionals in the relevant jurisdiction. While care has been taken to ensure the information is accurate at the time of writing, The Swedish Club accepts no liability for any loss or damage arising from reliance on its contents. Cover is governed at all times by the applicable policy terms, conditions, and Club Rules.