The recent eruption of hostilities and atrocities directed at Israel unleashed not only an Israeli response but also a wave of concern about regional contagion. Behind that lay the practical concerns for the aspects that touched on the supply chain actors.

From the initial shock, the port situation was unknown so some vessels diverted from Ashdod and Israel offered low key military help particularly off Ashkelon which closed for a while. Evergreen declared a force majeure on one of its vessels and cruise operators urgently reviewed their call schedules after a missile overflew tourists ashore in Aqaba. Israel places great confidence in its Iron Dome defence system and considers its ports to be “highly protected strategic facilities”, but collateral damage cannot be ruled out as Hamas marine capabilities and intent at sea are something of an unknown.

As Israel and Lebanon were already listed as being of enhanced risk, underwriters were notified of voyages and were able to react quickly in proportion to events. With Israel heavily reliant on the security of its ports for food and consumer goods, the Israeli tax authority swiftly announced a compensation scheme for “war damage” caused by either side to any Israeli or foreign vessel in Israel’s economic waters. The speed with which this was put together was notable.

Their statement specified that “War damage is defined under the law as damage that is caused to the body of an asset due to acts of war by the regular forces of an enemy or due to other acts of hostility against Israel, or due to acts of war by the Israel Defence Forces,” and that the rate of compensation would be 100% of the “actual damage”, being the difference in value of the asset prior to the incident and after it was damaged. The fluid and changing public use of terms regarding war, acts of war and terrorism will muddy the legal waters when claims come to be assessed.

A significant new twist was added when Houthis seized the Galaxy Leader on 19th November using an Mi-17 helicopter to insert an assault team of eight men carrying AK-type rifles. That was a game changer and will require a ship security rethink. It was not in any security procedures manual for commercial vessels. Even if the vessel had an armed team aboard, the dispositions they would have to make in a very short time would not guarantee a successful defence. Worse, having demonstrated their capability, the Houthis also deemed anyone they considered a supporter of Israel to be a legitimate target. Trading and underwriting in the area have entered another phase of risk and uncertainty where political motives clash with commercial operations.

Source: International Union of Marine Insurance