Saudi Arabia is exploring establishing a state-backed war risk insurance programme to reduce insurance costs for ships and cargo as risks escalate in the region.
According to the Financial Times, the Saudi Ministry of Finance held talks with insurance brokers in London about establishing an insurance pool that could provide commercial coverage of up to SAR700m ($187m) for each insured incident, such as a ship being targeted by a missile or being seized.
It is proposed that insurance and reinsurance companies bear the initial tranches of risk, with the Saudi Export-Import Bank providing an additional government guarantee of hundreds of ms of dollars for each insured party.
One proposal involves Saudi Re and Riyadh Re leading a group of participating reinsurers, with the possibility of international companies joining the programme.
The move comes after insurance companies raised their prices and reduced coverage for ships, infrastructure, oil shipments and chemicals in the region, as the war with Iran continues and Houthi attacks escalate. In some cases, insurers refuse to provide coverage for war risks for ships intending to transit the Strait of Hormuz or the Red Sea.