SINGAPORE : Marine insurance for shipping companies has increased significantly over the last year and it looks set to rise even higher this year.
Analysts said that a typical bulk carrier valued at US$50 million will now have to pay an estimated additional premium of US$50,000 a month.
This is partly due to rising piracy risks and political unrest in the region.
But analysts said the higher shipping costs would only be passed on to consumers and this would further add to their inflation woes.
Analysts said the outlook for the shipping industry looks rough this year.
Marine insurers are charging shipowners, such as Rickmers Maritime, higher insurance premiums and this will raise shipping rates.
Analysts said this is due to rising piracy risks globally.
Thomas Preben Hansen, CEO of Rickmers Trust Management, said: "There is no doubt, (with) additional war-risk premiums, which (are) put in place in the piracy-prone areas, the typical container carrier is faced with up to 30,000 to 40,000 dollars additional premiums (when) going through the piracy area."
Analysts added that with the political uncertainty in Korea and unrest in the Middle East, the insurance premiums for ships will rise even higher this year.
Teddy Tsai, deputy head of research at DnB Nor Bank, said: "Cargo cover will be influenced by higher events around the world. Last year, we saw things like the Korean missile test and things like that; some of these things can continue this year."
Shipping analysts added that Egypt's popular Suez Canal of the Red Sea is now considered a "higher risk area" by marine insurers.
As the majority of trade from Asia to Europe passes through the Suez Canal daily, most Asian shippers will have to incur these higher insurance premiums.
A spokesperson for General Insurance Association of Singapore (GIA) said that there are two main types of marine insurance - cargo and hull insurance.
GIA added that piracy and hijacking risks would have a greater impact on hull than cargo insurance, and in general, ship owners have to bear the higher insurance costs.
This is particularly so when the piracy involves the kidnapping of the captain and crew members for ransom.
However, shipping experts said that as shipping companies struggle to keep afloat and watch their bottomlines, they are unloading the bulk of these higher costs to their customers instead.
Mr Hansen said: "Whether there is an increase in fuel cost or insurance cost, or charter rates, ultimately it will be priced in the freight rate and passed on the consumer. So our carriers, our customers are paying these additional premiums, for the trade on most of our ships."
As a whole, however, analysts pointed out that overall insurance costs for shipping companies are still relatively low at less than 5 per cent.
Shipping analysts said that shipowners are passing the bulk of these increased costs to the shipliner companies, by charging them higher freight rates. These higher costs will eventually be absorbed by the average consumer on the street.
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