After failing to confront military threats: Bin Salman and Saudi Arabia moved to a new plan

Saudi Arabia is negotiating the establishment of a government insurance mechanism to cover war damage in the Red Sea, following a sharp increase in marine insurance premiums and the Houthis' declaration of a naval blockade in July. The mechanism could provide coverage of up to 700 million Saudi riyals per event.

Saudi Arabia is negotiating the establishment of a government insurance mechanism as part of preparations for continued attacks by the Houthis. The plan under consideration could provide coverage of up to 700 million Saudi riyals — about $186 million — per insurance event, including missile strikes or vessel seizure. Under the proposed framework, insurance and reinsurance companies would provide the first layer of coverage, while the state may offer additional backing through the Saudi Export-Import Bank. Reinsurance companies "Saudi Re" and "Riyadh Re" may play a central role in the initiative, alongside international partners. The need for the new mechanism has intensified in recent months due to the sharp rise in war insurance premiums for ships operating in the Red Sea. The Houthis declared a naval blockade against Saudi Arabia last July, and subsequently additional vessels identified with Britain were attacked. Following these developments, the London marine insurance market expanded the high-risk area along the Red Sea coast. War risk insurance premiums for ships visiting Saudi ports surged from about 0.25% of the vessel's value to about 1%. The government mechanism aims to expand insurance availability and reduce costs for companies seeking to continue operating in the area despite the security risk. However, the talks are still ongoing and there is no certainty that the framework will be approved.