The sinking of two commercial ships in the Red Sea this week by Houthi militants has reignited global concern over maritime security - and placed the war risk insurance market under renewed strain. But for one leading risk specialist, the greater threat may lie ahead.
“This was a claim to fame to get to the world stage,” said Captain Rahul Khanna, global head of marine risk consulting at Allianz Commercial, referencing the Houthis’ dramatic publicisation of the attacks. “The model is there for anybody else to pick up. Hopefully it does not happen.”
Khanna was speaking days after the Magic Seas and Eternity C, both operated by Greek shipping firms, were struck in separate incidents that left at least four sailors dead and others reportedly kidnapped. The attacks, described by insurers and diplomats alike as both deliberate and indiscriminate, have pushed war risk premiums to levels not seen since the height of the Red Sea crisis in 2024.
According to industry sources, underwriters are now charging as much as 1% of a vessel’s insured value to transit the region - up from 0.3% just a week earlier. For a $100 million ship, that equates to an extra $1 million in insurance for a single voyage.
Despite the turmoil, Khanna said insurance capacity has not disappeared entirely. “Even during the all out wars back in the day, the insurance covers were still available,” he said.
But he acknowledged that for some insurers, the risk may now exceed acceptable thresholds. “There may be models or insurers on calculations which might think that the risk is now beyond a certain point and we would not like to go ahead with the risk transfer.”
Even so, he suggested many war risk underwriters will continue to support transit through the Red Sea - albeit at sharply increased cost. “There will certainly be insurers who will be thinking twice.”
As the targeting criteria grow increasingly opaque, insurers and brokers alike are recalibrating their approach. This week’s attacks appeared to target vessels without direct links to Israeli ports or trade.
Khanna urged shipping clients to avoid complacency and to conduct their own assessments, regardless of the political context or statements made by militant groups. “Ship owners... will need to be really, very careful about how they do their own risk assessments on thinking whether they can get a safe passage or not.”
“Even though when Houthis would say that we are only attacking a certain category of ships, I'm not sure the ship owners should be taking that on face value,” he said.
Some operators are already rethinking their logistics. Khanna said that rerouting is increasingly viewed as the prudent course. “The option remains, obviously, to go around the Cape of Good Hope and avoid the Red Sea area altogether,” he said. “Which I think in many cases, they should start thinking about, not just the vessel owners, but also the cargo owners.”
He added that pressure from charterers could accelerate that shift. “If the charters come up and impose upon the ship owners that we don't want this, and they are looking for vessels which do not want to transit the area, then automatically the market will shift.”
Khanna also voiced concern over the human cost of the violence and its effect on workforce morale and recruitment. “It is absolutely appalling to see seafarer casualties in any of this, because these are people who are earning their daily wages… And we've seen loss of life now repeatedly over the years, and this is certainly not acceptable from any standpoint,” he said.
“They are not in the business of, they're not in a position to protect themselves against these highly advanced weaponry and the mode of conduct. They don't even have weapons of any sort on board the merchant vessels.”
“By any such imagine, they're not paid the wages to gamble on their lives for sailing on warships and running an operation.”
He warned that repeated incidents of this nature could deter new entrants from joining the industry. “We are already having a large amount of shortage in seafarers across the different segments of shipping industry. And anything like this, if it goes on, puts a very, very detrimental impact on new recruitment.”
“If you don't get the right talent, then the operations of ships become more hazardous, most riskier, leading up to more incidents and accidents.”
The recent attacks occurred after months of relative calm, but Khanna emphasised that the threat never truly vanished. “I don’t think this has gone away,” he said. “This threat is still real.”
He noted that Allianz had raised concerns earlier this year that the Houthis were unlikely to disarm simply due to a ceasefire or temporary reduction in hostilities.
“Yes, if there's some sort of a ceasefire deal, or whichever way, which might make the world think that, well, these [groups] have no reason to do it - I still doubted that,” he said. “And we mentioned that in the report, that this is not gone and this threat is still real.”
Diplomatic responses have followed swiftly. At the UN Security Council this week, the UK’s Ambassador, Dame Barbara Woodward, condemned the attacks and called for strengthened enforcement of the arms embargo on Yemen. “They have led to the tragic loss of life of innocent mariners,” she told delegates. “They undermine maritime security and global trade, and pose a significant risk to the environment.”
But for those tasked with underwriting and insuring global marine traffic, the most pressing concern is not simply the scale of the violence - but its unpredictability, and its potential to serve as a template for others.
“This is one of the big risks that… is on the back of the mind,” said Khanna. “Hopefully... the authorities and the Navies of the world, and the coalition forces of the world, come down very quickly, with some affirmative actions,” adding that stronger international enforcement is needed to contain the risk.
