As the Persian Gulf region prepared for a war Wednesday, prices for insurance for ships, businesses, oil workers and journalists skyrocketed. Prices to cover ships and personnel, which had been creeping up since fall, jumped Wednesday to twice what they had been the day before.
While prices in most of the world are usually calculated on an annual basis, coverage for tankers and cargo ships plying the gulf is being sold for seven-day voyages so that rates can be modified as conditions change. Coverage is now being offered week to week for tens of thousands of expatriates still in Kuwait, Turkey and, in a few cases, Iraq.
While most commercial ships are sailing out of the area, those remaining are paying dearly. The cost of war insurance for an oil tanker in Kuwait that is valued at US$40 million rose Wednesday to US$200,000 a day, up from US$100,000 the previous day, said Martin RD Reith, the chief executive of Ascot Underwriting, a unit of Lloyd's of London.
PHOTO: AP
That is in addition to the US$600,000 to US$1.2 million for standard coverages to replace the ship and the cargo.
For US$1 million in coverage for death or disability for an oil worker, a journalist or anyone else in Kuwait, Iraq and Turkey, the premium jumped Wednesday to US$20,000 a week from US$10,000 the previous day, said Jonathan Sale, a director of Miller Insurance Services, a broker in London. As recently as January, the cost had been US$5,000 a week.
Prices are up, insurers and brokers said, because, as they see it, the risk is soaring.
"In January, there was no certainty that there was going to be a war," Sale said. "Two weeks ago there was more of a risk, but it was not absolutely certain. Now, the feeling is that war is an absolute certainty."
Prices are rising daily, and Sale said the price of the insurance on individuals -- which does not cover sickness or pay for death or injury caused by a nuclear, biological or chemical attack -- "could easily rise to US$50,000 for US$1 million in coverage" in the next few days.
International insurers in London said on Tuesday that they planned to cancel coverage for cargo carried in ships and aircraft 48 hours after the fighting starts in Iraq with the understanding that the coverage could be reinstated, but at higher prices.
So far, insurers that specialize in war insurance for commercial aircraft have taken no action on pricing. Their standard contracts provide for cancellation with a seven-day notice after a war breaks out. But that coverage, the insurers say, is intended for "unexpected acts of war." When war is expected or has begun, they say, they must be able to raise prices to match the new level of risk.
Robert E. Karl, an aviation specialist in Houston for AON, the big insurance broker, said that US airlines would probably not be affected by any cancellation of war coverage because their insurance is being provided by Washington.
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