Landing the Big One

Landing the Big One

Thursday, August 11, 2005

Insurance rates for Malacca Strait barely rise?

Reported here. I guess all the excitement about a possible increase was much over done.
But Ken Alston, managing director at global insurer Marsh & McLennan Cos. marine practice in London, told Reuters costs for the ship charterer and ultimately the consumer would barely rise.

"Whilst there is a significant increase in the war premium, it would not translate into a big increase in carriage costs for the cargo owner," he said.

"Put it this way. You won't see it pushing up the cost of your i-Pod," said Alston, adding that the screams of pain from the maritime industry on costs were overblown.

More than a quarter of global trade passes through the thin stretch of water, including most of the oil imported by Japan China and South Korea.

More than 50,000 commercial vessels ply the waterway that links Asia, with the Middle East and Europe.

Alston said Marsh estimated the war risk rating would push the worldwide hull insurance market up by 50 percent from $100 million to $150 million, on a calculation of 60,000 transits per year.
Update: Let me translate- even though the ship owners will be paying 50% more, the cost increase per cargo owner (when spread over a large number of goods, won't raise the price much of each item to the consumer. However, having the insurers explain that it's just a small "rise" is somewhat like having the fox suggest that hen house security is adequate.

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