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Insurance costs to escalate again for Gulf region vessels

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Damage sustained by an Iranian oil tanker in October will drive insurers to further raise War Risk insurance rates for vessels operating in the Gulf region, adding to a tenfold increase since attacks on tankers in May, according to UK legal firm DWF.

An Iranian-owned tanker was damaged on October 11 by what local media said was two missiles.

This latest incident will see shipping companies operating in the region forced to absorb added costs, with affordable insurance in the high-risk zone becoming harder to find, said Jonathan Moss, Head of Marine & Trade at DWF.

This could lead to cost-cutting measures in other areas of maritime trade, he added.

"Marine insurance, Cargo and Hull & Machinery cover incorporating War Risks is uncontrollably linked with geopolitical conflict,” Mr Moss said. “The continued instability and unpredictability in the region will have an adverse effect on sea trade…and will add to the growing trend of increasing marine insurance premiums."

This month’s explosion, which added to tensions between Iran and Saudi Arabia, caused an oil spill into the Red Sea, though this was brought under control, according to Iranian news agency IRNA, and the crew was reported to be safe.

“Whether this was an act of terrorism or indeed a breach of international sanctions is of crucial significance in determining whether and how cover might respond, if at all,” Mr Moss said.