Reflections on Red Sea and Suez Canal Situation
Colin Dawson, Managing Director, The George Group and Representative on behalf of Howden Insurance Brokers (HK) reflects on the current insurance situation for yachts in the Middle East. After contacting a number of industry professionals in the superyacht world, that included Captains, security companies, underwriters, managers, agents, and insurance brokers, the general consensus is ‘don’t go!
“I appreciate that the desire was some concrete statement that can be attributed to someone who is well qualified to give it. Of course, there is plenty of opinion from many ‘experts’, says Dawson. “However, no one I know will put their name to any firm comment as the situation is too fluid and can change daily, hence War cover only being provided in 7-day periods.”
As we all know this part of the world is not a great part to be in at present and, the area is pretty empty. Unlike commercial shipping, yachts have an easier choice to make in that they can simply change their plans with little or no financial consequence … unless you are a charter yacht. I know a charter yacht in Asia that has a full summer schedule in the Med and its looking like that may be cancelled because she is in Asia and not (at present) keen to go round the Cape. The owner has an itinerary in this part of the world and will he be prepared to sacrifice this to allow for the extra time taken to go round the Cape to honour charter commitments?
Time will tell but he is running out of this if the yacht is to be in the Med and ready by June. However, staying in Asia will dent both the owner’s and crew pockets with a charter fee of approximately USD700,000 a week. It’s not likely he will pick up replacement charters over here to the tune of what he has ready and waiting in the Med. From an insurance perspective the comment is mixed from simply not allowing it to allowing it with limited Hull cover in place. Motor yachts are more likely to be allowed to go through than sailing yachts because of their potential speeds under engine.
War premium has gone from 0.02% per annum to between 0.50% and 0.75% for 7 days. Different insurers are taking different approaches. Some see it was a way to bring in substantial premium income for a risk that is, in reality, not aimed at yachts. Where some insurers are simply excluding War cover others are accepting on stand alone covers for 7 day periods. Certainly it can be a good earner for them. If an average premium per annum for a yacht of, say USD25 Million in value is $100,000 for the Hull and Machinery cover and for a period of 7 days an insurer can earn $150,000 there is certainly good money to be made.
Looking from the yacht’s side, Captains and crew don’t want to risk it and I know of Captains telling owners that if they want to send the yacht through the Red Sea they can find a relief captain to do so. There is a lot of push back from crew also. I’ve heard of at least five superyachts heading round the Cape and I am sure others will follow if the situation continues and those that have already gone report reasonable trips.
There is a magnificent opportunity here for Cape Town to shine and also make good money on port calls. This could well set Cape Town up for long into the future in terms of looking after superyachts even more than it does now. There is great opportunity to make Cape Town a destination, mixing in yard time and a safari or two for the owner. Bearing in mind I heard of a yacht that used to be in my part of the world where the owner would only eat exotic and rare animals while on board a good dose of conservation might be a good thing!
Speaking with agents, they are hurting with cancelled and delayed visits. Some yachts are staying here longer of course and those that do seem to be looking for cheaper and less hassle stops than Hong Kong and Singapore. The paperwork and hassle factors for superyachts (excluding Singapore which seems to have got its act together) to visit our region never ceases to amaze me and is definitely off putting for Captains. Something that the Asia Pacific Superyacht Association and the Asia-Pacific Superyacht Summit in Hong Kong in June can perhaps address.
In conclusion, at present it is possible to go through but at a cost with limited insurance cover in place, offered by a reducing number of insurers. Crew are not likely to be happy with any decision to go through and it would be interesting to see a real life comparison of the overall costs of sailing through the Red Sea at high speed versus pottering around the other way versus shipping. In Asia we would love yachts to stay here and have plenty to offer them but at the same time we want others to visit, something that looks less and less likely to happen the longer the situation continues.
Story courtesy of Colin Dawson, Managing Director, The George Group