The ongoing conflict in the Middle East has significantly affected Sri Lanka's export sector, particularly tea and spices, both of which depend heavily on maritime routes through the Red Sea, the Strait of Hormuz and the Suez Canal.
Sri Lankan insurer Orient Insurance MD and CEO Tanuj Edward, speaking with Asia Insurance Review, said, “These routes are vital not only for shipping but also because the Middle East itself is one of the largest markets for Sri Lankan tea and spice products.
“The Middle East accounts for nearly half of Sri Lanka’s tea exports, with a large share of supply from the country’s low-grown tea sector, which is dominated by tea smallholder farmers.”
“Our annual tea export earnings amount to approximately $1.5bn, of which around $530m comes from exports to the Middle East according to the Tea Exporters Association.”
Mr Edward said, “With the escalation of hostilities, several shipping lines have suspended or rerouted vessels due to security concerns and rising war-risk premiums. This has led to logistical delays, higher freight charges, and increased marine insurance costs.”
Exporters have said that even when orders are available, shipments cannot be executed efficiently because of these disruptions. The Tea Exporters Association estimates that Sri Lanka’s tea industry alone could face losses of around $10m per week if the situation persists.
He said from an insurance perspective, most standard cargo insurance policies exclude war-related risks. Governments also have limited direct intervention capability in such global geopolitical disruptions. However, policy support measures, such as trade facilitation and logistics coordination, would be possible.
Mr Edward said, “Domestically, Sri Lanka is also managing fuel supplies cautiously due to constrained stocks. Nevertheless, authorities have indicated that priority will be given to manufacturing and export-oriented industries to ensure continuity of production and protect vital interests of our exporters at this critical juncture.”