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Houti and the Insurance Blowfish

When we consume the evening news, the developments in other countries can often feel worlds away and disconnected from our everyday lives. The connection between strife in the Middle East, attacks on trading vessels in faraway straits may feel distant, but they have a very tangible impact on our daily lives. There’s a hidden link between war and our consumer goods—and that link is insurance.

Think of insurance as a protector of our economy. When companies send goods across the world, there are lots of risks, like storms and raids. In some periods of history, like the current one, there is also a risk of military strike. Insurance is a safety net for shipping companies as it helps them out by lessening the financial impact of unexpected events.

Unfortunately, war strikes on trade ships are not uncommon. Sometimes, conflicts between countries affect the seas, disrupting the flow of goods. Today, we’re witnessing ongoing attacks from the Houtis, a Yemen militia group, on sea vessels. This is where insurance and war strikes are connected. Insurance, especially for things that happen at sea, plays a big role in helping businesses recover money they lost during times of conflict.

Imagine a situation where a ship carrying things we buy, like clothes or electronics, gets hit in a war strike. This, most importantly, puts lives at risk—and the loss of any life is a huge risk that operating companies must try to avoid and, in some cases, insure against. Any risk of losing a ship, including the goods it’s carrying, is a massive problem for the company that owns the ship and for the businesses waiting for those goods. Insurers won’t cover a ship that will be moving through a zone with active strikes. Without insurance, a company cannot risk losing all the value and investment held on that ship—both the vessel itself and the goods it carries. Ships that are insured when they set sail but receive a strike while at sea then become uninsurable, representing the loss of millions of dollars of trade.

The things we buy every day are tied to how international trade works. When war strikes impact the movement of goods, it directly affects what's available and how much things cost. Insurance becomes extremely important in these situations. It helps businesses deal with the challenges of war strikes, making sure that even when there are problems, we still get the things we need without them being too expensive. If sea trade is at risk, air freight is an option—but a much more expensive one at four or five times the cost.

Insurance helps businesses go through these tough times, making sure that problems from war strikes don't make things scarce or too costly for us consumers. It acts like a strong support that stops issues in the supply chain from reaching us and making our lives harder—though undoubtedly, there will be impacts to the costs of goods being transported, as the cost of insurance needs to be recovered at some point during the transaction.

To sum it up, the connection between insurance, trade ships, and the things we buy shows how everything in our world is connected. Insurance helps companies handle the challenges of conflicts and still bring us the things we use every day.

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