Malacca Strait terror rating to barely raise costs

The cost of shipping goods and commodities through the Malacca Strait will be minimal despite a new "war risk" rating given to the strategic Asian sealane, a leading insurer said on Thursday.
The channel, which snakes between Indonesia and Malaysia, was added to a list of 21 areas deemed to be high risk and prone to war, strikes, terrorism and related perils in late June.
The international insurance market through the influential London-based Joint War Committee (JWC) justified the move on the basis that extremist groups in the region linked to al Qaeda were known to have plans to attack transiting ships.
The global shipping industry and regional governments have been incensed by the decision and called on the rating to be reversed.
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.
"So that's 50 percent more for every merchant ship transiting the strait" on hull insurance.
But he said actual costs on an additional premium of 0.01 percent of hull value, which some underwriters were now charging, would translate into just $10,000 per trip for a typical container ship valued at $100,000 million.
Alston, however, still criticised the decision. He said it would require added resources from shipping companies which would need to inform underwriters of plans to navigate in "war risk" waters.
"We think it is a mistake to charge additionally when a vessel goes through the strait."