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Exporters brace for high cost of insurance amid tense backdrop of Iran-Israel conflict

The recent tension between Israel and Iran have ushered in a precarious calm, leaving observers uncertain whether it’s merely a pause before an impending storm

R. Suryamurthy New Delhi Published 29.04.24, 07:27 AM
Container costs to rise.

Container costs to rise. Sourced by the Telegraph

Amid the tense backdrop of the Israel-Iran conflict, exporters are grappling with the spectre of escalating insurance and container rates with potential repercussions on global trade dynamics.

The recent tension between Israel and Iran have ushered in a precarious calm, leaving observers uncertain whether it’s merely a pause before an impending storm.

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Shipping container rates have already surged by 40-50 per cent compared with the previous year, accompanied by a corresponding increase in insurance premiums.

Furthermore, the insurance costs for shipping lines have skyrocketed, with war risk premiums ballooning from a mere 0.05 per cent to a staggering 1 per cent of a vessel’s value. For vessels valued at approximately $100 million, this translates to an exorbitant additional cost of $1 million in war risk premium expenses, a burden voiced by exporters.

Compounded by the spike in costs, the prolonged freight shipments due to circumnavigating the Cape of Good Hope route are raising alarm bells among exporters, who fear losing their foothold in European markets.

While air freight initially seemed a viable alternative, traders are now contending with disruptions in flight schedules compounded by escalating airline rates. With an anticipated 15 per cent surge in air freight rates from India to Europe and the added complications of shipment backlogs and airspace restrictions over Iran, exporters are actively seeking alternative logistics routes, they said.

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