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MIDDLE EAST HOUTI ATTACKS ON SHIPPING What's Going on With Shipping? Who Pays for the Red Sea? Shipping and Marine Insurance \| Where were the EU and US navies? PLAY YOUTUBE VIDEO Original article: https://www.youtube.com/watch?v=7zi_kWL72dg
Who Pays for the Red Sea? \| Shipping and Marine Insurance \| Where were the EU and US navies? What's Going on With Shipping? Jul 11, 2025 531K subscribers ... 85,391 views ... 6.2K likes #magicseas #houthis #RedSea In this episode, Sal Mercogliano — a maritime historian at Campbell University (@campbelledu) and former merchant mariner — discusses the sinking of MV Magic Seas and Eternity C and the issue regarding War Risk Insurance and Additional Premiums; where was the European Union Operation Aspides and US 5th Fleet; and what does this mean for the consumer? #supplychain #houthis #eternityc #RedSea #shipping #magicseas Support What's Going on With Shipping via: Patreon: www.patreon.com/wgowshipping Twitter: @mercoglianos Bluesky: @mercoglianos.bsky.social Facebook: @wgowshipping Email: mercoglianosal@gmail.com 00:00 Introduction 02:43 Background on sinking of Magic Seas and Eternity C 06:03 Does Insurance Cover the Ships? 12:59 Threat to Merchant Mariners 14:02 Where was the Navy? 16:37 What does Houthi Unrestricted Warfare mean for Shipping? Lloyd's List Seasearcher www.seasearcher.com The Daily View: Eternity C and Magic Seas: shipping and marine insurance in shock ... https://www.lloydslist.com/LL1154175/... Vessel Protect has 100% war risk line on Magic Seas ... https://www.lloydslist.com/LL1154172/... Travelers named as insurer that declined war risk cover for Eternity C ... https://www.lloydslist.com/LL1154180/... UK War Risks ... https://www.ukwarrisks.com/ap-areas/ War Risk Premiums Surge Amid Renewed Red Sea Attacks ... https://gcaptain.com/war-risk-premium... Philippines orders crews to avoid high-risk areas as more recovered from Eternity C ... https://www.lloydslist.com/LL1154171/... Peter Burgess COMMENTARY Peter Burgess Transcript Introduction 0:00 on this episode of what's going on with shipping. Who pays for the Red Sea? I'm your host, Sal Magaliano. Welcome to this episode. So, we have been tracking what has been transpiring in and around the Red Sea since November of 2023 when 0:15 the Houthi made their attack against the 0:18 motor vessel Galaxy Leader, seizing the 0:20 vessel, capturing the crew, and holding 0:22 the crew hostage for over a year. What 0:26 we've seen happen over the course of the 0:28 year has been a massive campaign 0:31 executed by the Houthi against 0:33 commercial shipping and then retaliation 0:36 strikes launched by the Israelis, the 0:38 United States, the United Kingdom. Uh 0:40 we've seen the diversion of shipping 0:42 from this region to go around Africa and 0:46 previously we've seen the sinking of two ships, the Ruby and the Tutor. And in December of 2024, we saw the campaign by the Houthis really peter out. It was seems to have been ended largely because 1:02 of a ceasefire that went on between Israel and Gaza and Hamas and because the Houthi had been damaged quite severely. There was the initiation of a large campaign initially launched by the Israelis and then by the United States Operation Ruff Rider that appeared to have damaged the Houthi and their ability to stage attacks. Well, beginning of July that all changes. What we see here is the loss of two ships in the first week of July. The Magic Seas on the left and the Eternity Sea on the right. And this represents a big uptick in Houthi attacks because of the dead crew members on the Eternity S4. Five others are missing. Six have been grabbed by the Houthy. And this is causing a lot of consternation when it comes to global shipping. What we're going to focus on today is talking about the cost. We're going to talk about the financial cost. Who pays for the loss of these vessels? uh who is going to assume 2:01 the mantle of providing protection in and around this region because I have to say there was no apparent naval forces in the area. Uh the crew from the Magic Seas was picked up by a passing commercial vessel and then the Eternity Sea was picked up by a hodgepodge of different groups who were in the area. What was starkly missing was any naval presence at all. European Union, US, anybody. there didn't seem to be anybody in and around the area and we're going to talk about that. And then finally, what does it mean for you, the consumer, for this style of attack in terms of disrupting global shipping? If you're new to the channel, hey, take a moment, subscribe to the channel, and hit the bell so you be alerted about new videos as they come out. So, first I want to Background on sinking of Magic Seas and Eternity C 2:44 give a big shout out to Lloyd's List 2:46 Intelligence, who has given me access to 2:49 their database system, the Sea Searcher. 2:51 It's great. It provides you a lot of 2:53 information on vessels at a single 2:56 touch. It's really nice. What usually 2:58 had taken me multiple sources to go 3:01 through, I can kind of pull it together here. This is for Magic Seas. Uh you'll see the ship is a Liberian flagged Greektondown vessel. The ship in question was sailing from China to Turkey with a load of iron and fertilizer. When you look at ownership of this vessel, you'll see the ship is Greekowned. There is a Liberian shell company out there. This is very typical in shipping. you create a shell company to put a ship under so that if the ship is sued, there's no assets in the company except for the ship itself. But this company in particular here, uh, the Bedrao family, who's the beneficial owner, the ship is managed by Stem Shipping, one of the arguments that the Houthi put out here for attacking this ship, was that the parent company had ships that went in and out of Israel. Therefore, even though this ship didn't go in and out of Israel, it's because of ships within the company going in and out of Israel. This ship is subject to attack. That's right. Six degrees of 4:00 separation of Kevin Bacon is the strategy adopted by the Houthies. I should say that based on that strategy, one out of every six ships sailing on the oceans today. There's about 100,000 ships sailing on the oceans today. About 15,000 ships fall under that criteria. That's kind of a stretch there, Houthies. That's even for you. That's a that's a big stretch. Now, second vessel eternity seas also Liberian flagged, also Greek owned. In this case, this ship had sailed from Houston, Texas down to Barabara in Somalia. It was offloading UN World Food Aid soybeans to Somalia. It had some residual cargo left in it. According to the Lloyds, approximately 1,400 tons. They were sailing north in the Red Sea to Jedha in Saudi Arabia, more than likely to offload that remaining cargo for distribution via smaller vessels to Sudan and Eratria in and around the Red Sea when the ship was attacked. And much like we saw with Magic Seas, same thing 5:01 here for Eternity Sea. In this case, the ship again Greek owned. Uh we see a variety of Greek companies here. Cosmo ship management in there. We see that Liberian shell company in this case Guilford Navigation as the registered owner. In the case of Eternity Sea, what the Houthi alleged is the ship wasn't going to Jedha, but was going to the southern Israeli port of a lot. There's no indication from the AIS, the automatic identification system, that the ship was going to a lot. A lot declared bankruptcy. It had basically closed down as an operational port. All of Israeli port management is basically done through the Mediterranean ports now. So very unclear why an empty bulker would have been going up to Israel after offloading in Somalia. It doesn't doesn't make a lot of sense. But again, this this is the Houthi. They tend not to make a lot of sense when they stage their levels of attacks against commercial shipping. But what is clear is this is a Greekowned Liberian flagged 6:00 vessel, multinational crew on board. Does Insurance Cover the Ships? 6:03 That gets us into the issue of insurance. Now understand ship insurance. There are two types of insurance on a ship. There's what's called H&M, hull and machinery. That is the vessel itself. And then there's PNI uh protection and indemnity. That is the cargo on the vessel. And then there's war risk. Now ships usually carry a type of war risk insurance on them because you never know where this may happen. However, there are areas designated around the world where you need additional protection. We're going to talk about that. Well, in the case of the Magic Seas, this story over at Lloyds by David Osler, Vessel Protect has 100% war risk line on Magic Seas. The Handymax, that's the size of vessel that the Magic Seas was, was hit by the Houthies on Sunday. The estimated whole value is around $40 million. The bulker entered with the Swedish club for its PNI coverage. And so, it appears as if Magic Seas is covered. the insurance 7:00 company will pay out on the vessel. Crew had been saved, deposited in Djibouti. So, vessel protect comes under that full protection. We're going to see a payout by the insurance companies. Now, I should note that one of the big winners over the past year and ever how many months it's been since this started in the Red Sea has been insurance companies. Even though 40% of ships are going around Africa right now, the ships that are sailing through this area have to pay war risk insurance. It was up to about 1% the value of the shipping and cargo for war risk and very few ships have been hit or damaged during the Houthi campaign. We estimate about 130 ships have been attacked. Two ships previous to this have been sunk damaged to maybe a dozen others. In terms of the payout by the insurance companies, it's been very little. Insurance companies are great, man. They just rake in those those those premiums and they don't ever want to pay out. It's no difference with car, life insurance, or ship insurance. And that's what we see right here. So, 8:00 vessel Protect paid out on the Magic Seas. However, Eternity Sea is a different matter. Here's another Dave story, Dave Oler story. Travelers named as insurer that declined war coverage for EternityC. The decision swerved a big payout. Vessel total loss with four dead, five still missing. Insurance status of the bulk carrier is unclear. All right, let me break this down for you. So, the Eternity C had war risk insurance on it. However, what Travelers is saying, and yes, Travelers Insurance, that is the insurance company in the United States that some of you will be familiar with. What Travelers is saying is that EternityC basically violated their coverage for a couple of reasons. One, Cosmo Shipping, which is the operator of the vessel, had vessels of its company going in and out of Israel, and that made it a target for the Houthi. Second, the ship did not get the additional protection required for sailing through the designated war zone. 9:02 What do I mean by that? This is the UK war risk site. Now, UK war risk sets war risk insurance around the world. It's not just for the United Kingdom. And they designate these high risk areas. And they have here the additional premiums map so that if you sail into these areas, you will require additional coverage. As it says here, the ports, places, countries, zones, or areas listed in this section are all additional premium areas as defined by club rules rule 19. The ports, places, countries, zones, and areas listed shall include all harbors, offshore installations, and terminals unless otherwise stated. These areas are considered much more likely to be affected by war risk and so represent a significantly greater risk to ships that visit them. So this is the additional premium areas map put out by UK war risk. This is for and I'll show you the the full planet here. This is page one. Shows you South America but more importantly for us Africa and the Middle East. And here you see the Gulf of 10:01 Aiden, Indian Ocean, Babel Mandab and the Southern Red Sea. All of these areas require additional premium. Same thing up here in the Straits of Hormuz. And then over in Europe and Russia, areas in and around Russia require it. And then down in the Black Sea, we can see how the northern Black Sea has those additional areas of risk and protection. So if you steam into those areas, you have to pay an additional premium. Now, typically you're paying maybe a fraction of a percent on a warrisk policy, 0.01. It could even be lower than that in some areas depending on where your routes are. Note that war risk premium insurance is not a set rate. You you go to insurance providers and you get your insurance from them. So just like every you know 30-year-old with a sports car who goes out to get you know insurance is going to get a different quote from a different provider. It's very similar to that in terms of shipping. So we see this story by Reuters over G Captain. 11:00 War risk premiums surge amid renewed Red Sea attacks. What I wanted to highlight is this. War risk premiums have risen to around.7% of the value of the ship from around.3% last week before the latest attacks took place. Sources familiar with the matter said rates for a typical 7-day voyage and that's usually what you buy is a 7-day voyage period which are set by individual underwriters have been quoted this week up to 1% matching the peak level in 2024 to Neil Roberts who's the head of marine and aviation from the Lloyd's Market Association. a fantastic person to know. Uh just a fountain of wealth of information. Quote, 'The recent attacks in the Red Sea have highlighted the need for caution when considering a transit.' Then we come to this Lloyd story. This is from over from Dave Oler again. Underwriters declined war coverage for final voyage of eternity sea. The additional premiums for the Red Sea transits now hitting 1% of whole price. And so what we're seeing is that increase in it. Now, understand bulk 12:00 carriers are on the low-end scale. So, if you have a ship like Magic Sea, is $40 million. 1% of that is $400,000. And $400,000 to to pay to sail through this region may be cheaper than the additional fuel it's going to take for you to go all the way around Africa and maybe go up into the Mediterranean. Now, you have to add a Suez Canal passage on there. So companies are always kind of weighing those two issues. Plus there's the time issue. The way bulk carriers operate, as I said before, they're kind of the Ubers of shipping. They go to wherever their cargo is. And if you are busy hauling around Africa, it's going to take you out of bidding for further uh cargos. And so you may be willing to risk a voyage through the region and get it. However, the fact that Eternity Seas's coverage is been denied by travelers, that is going to cause some hesitation by some shippers to want to go through this region. We also see this story from Threat to Merchant Mariners 13:00 Lloyds. This is from Bridget Dykum. Philippine orders crew to avoid high-risk areas as more recovery for eternity seas. Philippine issues orders to agencies to reroute or divert vessels manned by Filipino crew. Eight members of the crew and two security members have been safely recovered from Eternity Sea. Five remain missing and six are thought to be taken by Houthi forces. Now, of the 25 crew members on Eternity Sea, the majority of them are Filipino. Filipinos make up the largest single block of merchant mariners out there in the world. And so, the Philippines initially had said this uh they had gone back on it. They were talking about pulling all their mariners from sailing this region. The uh international trade federation workers, the ITF has been sitting there saying about sailing vessels into the straits of Hormuz. They've been arguing about sailing into this region. If they can convince mariners to bulk sailing through this region, then the Houthies are going to win success by diverting further ships out of this region. All right, let's Where was the Navy? 14:03 talk about then we talked about the financial costs, we talked about the merchant mariners. Where was the navies in this? So we know that there had been alerts put out. The UK MTO, the United Kingdom's maritime trade operations put out the warnings and the threats in the area. The European Union Operation Speeds has been present in the area since the early part of 2024. The problem with Operation Speeds is it's been underresourced. Typically anywhere from four to six vessels are a component of operation as speeds but the quality of the vessels has been mixed and in truth what the European Union has largely been doing has been escorting high value ships through the region. This was posted on the European Union's Operation of Speeds Twitter page just a few days before the attack July 5th. This is showing the Italian destroyer Andrea Doria providing close-in protection for two CMA CGM. These are 15:02 the French national line container ships sailing through. Now, container ships are very high value. Uh container ships can reach values of over half a billion to a billion dollars in terms of ship and cargo. And when you start talking about a billion dollar ship with a 1% war risk insurance on it, you're talking about $10 million. And so one of the things that the European Union has been doing and they haven't been very loud and vocal about this is providing protection for these ships going through. But the question is are they underwriting the war risk insurance for those vessels or are those ships getting a much lower war risk insurance because they have the protection of operation of speeds. uh the European Union, particularly the Italian Navy, the French Navy, the Marine National have been protecting ships of their own nationality, not flag, but nationality going through. At the same time, there's very little presence of the US Navy, 16:01 although the Central Command Twitter page posted this, a meeting of the USS Nimttz and the USS Carl Vincent battle group out in the Gulf of Aiden. Now, we had a carrier strike group presence in and around the Red Sea for a long period of time. The last carrier to leave the area was the Truman at the sunset of Operation Ruff Rider. Uh Vincent has been off the coast providing air cover and protection, but the Vincent was out with the Nimtts for this photo op. And unfortunately, what we see is there was obviously no protection in and around the Southern Red Sea when the attacks What does Houthi Unrestricted Warfare mean for Shipping? 16:37 took place. Now, for the Houthis, this is a success. I mean, they have been able to sink two ships. They have killed merchant mariners on board. This, more than anything else, is going to potentially shift cargo and ships out of this region. Some people were talking about a return back into the Red Sea. I don't foresee that happening anytime soon. I think we're pretty clear that the diversion around Africa is going to 17:01 be the norm for the rest of this year going further. I have a feeling that Iran is the impetus behind these attacks. They're pushing the Houthi to make these style of attacks on shipping out there because it increases their ability to get at the West, to get at Israel, to get at the European Union, to get at Japan, Korea, and all the other nations for their participation or support of the strikes against Iran by the Israelis and the United States. So, we're in a very unique period of time. The Houthies have basically declared unrestricted warfare against commercial shipping. You got to go back to World War I to find a similar version of this when the Kaiser used submarines to execute not one but two different versions of unrestricted submarine warfare. The first led to the sinking of the Lucatania and eventually the Germans backed off of unrestricted submarine warfare. They went to what they call the 18:00 cruiser rules where they stopped vessels, boarded them, and then sank them when allowing the crew to escape. Kind of what we saw with the magic seas, but unrestricted submarine warfare meant you shoot first and ask questions later. That appears to be where we're at now. Unrestricted warfare is the case for the eternity sea. And if this is the case, how does the world respond? Now, this is a Liberian flagged Greek owned vessel. Does that mean the Liberian and Greek Navy are coming to the aid of these ships? Probably not. Uh I can tell you the Liberian Navy isn't going to do it. Uh because there is no Liberian Navy. The Greeks were part of Operation Speeds. They have deployed vessels down there. Are we going to see more down there? I don't know. Uh this really creates a new problem for the world because we move shipping and cargo differently than we did prior to World War II. end of World War II, you vanquish, you know, enemy navies from the world's oceans. The Marine, the Imperial Japanese Navy, the Italian Navy 19:02 all disappear. And what you get from 1945 up until 2025 has been a period where the world's oceans are wide open. I mean, in the entire history of the Cold War, the only true maritime conflict you had, which was a maritime conflict, was the Faullands down in the South Atlantic. That was it. And that didn't really impede any cargo or traffic because it was down in the bottom of the South Atlantic. There's not a lot going on down there except for, you know, penguin trade. Uh there were other naval conflicts, but a lot of those conflicts were part of land campaigns. The India Pakistan camp uh campaign, the Arab-Israeli ones, Iran, Iraq in the tanker war, all of that was kind of part of a ground war. It didn't really spread out onto the world's oceans. This is much different. We're seeing this and not just in the Red Sea. We're seeing it in the Straits of Hormuz. We're seeing it in the Black Sea. We're seeing it in the Baltic Sea. We're seeing it over in the South China Sea. Uh this is expanding out and really 20:00 raises the question is what is the role of navies? What do you want a navy to do? Uh I'm a big proponent of the US Navy. I talk about the US Navy all the time. I think the US Navy has lost its history in many ways. If you talk to uh naval historians and members of the US Navy today, they will tell you the mission of the US Navy is to go fight the big decisive battle. You know, quote my hand, we're going to go out there and fight the big decisive battle. I think you need to go back and look at the early history of the US Navy to understand what the US Navy is about. I'll give you two examples here. One was a book written by my thesis adviser at East Carolina University uh called Stoddard's War. Mike Palmer wrote literally the only book out there on the quasi war between the United States and France at the end of the 18th century going into the 19th century. And then a recent book just came out by Abigail Mullins, Abby Mullins over at the US Naval Academy to fix a naval character, the United States in the first Barbary War. Unlike typical operational 21:01 histories of the Barbarie War that wants to talk about battles, Abby and Mike Palmer look at these conflicts in the context of commerce and economics, which I think is really important. If you look at the quasi war, we stood up an entire navy. The Navy took about a third of the entire national budget. But the amount of money the Navy made for the country by increasing trade, by protecting trade, offset the cost of that navy multiplefold. And in many ways, that's what we're seeing. Now, you may ask, what do I care about the Houthi attacking ships? I'm an American. What do I care? Well, in truth, some cargo from Asia goes through this region, goes to Europe, gets transloaded and shipped over. So, it does impact you. But more importantly, what this does is it raises the entire cost around the world to move goods. It's costs more money. You're burning more fuel. You're using ships on longer ton miles, longer voyages, which means you need more ships and needs more 22:00 crew. Uh it means you need more of anything. And more importantly, if you can put my little red Lego dot here, you can put my little red Lego dot on a few other choke points around the world and begin strangling global trade. That is the issue that we see transpiring right now in the Southern Red Sea. I hope you enjoyed today's episode. If you did, hey, take a moment, subscribe to the channel, and hit the bell so you be alerted about new videos as they come out. Leave a comment, share it across social media, and if you can support the page. How do you do that? You can hit the super thanks button down below or head on over to Patreon and become a monthly yearly subscriber. I I don't like asking for money, but as you can see, I have not been able to afford a razor for quite a long time. I appreciate everybody's comments asking me about this. It's just it's an experiment. I'm just trying it out for a little bit. I'm not sure if it's going to stay or not, but uh just giving it a try in a little bit. I'm not used to having to deal with hair on my head at all. Although, there was a stray hair the other day sticking out the side of my head, which too many of you wanted to comment about in the videos. Really, 23:01 people I I mean, you just you just that that's the comment I got was was S had a stray hair. I be clear, I haven't owned a comb in a long time. It's not something I usually worry about. Till the next episode, this out signing

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