New Lloyd’s Policy Wording Covers Terrorist ‘Piracy’
As the oldest marine insurer in the world, Lloyd’s has long been aware of the menace pirates pose to shipping. These days, however, they aren’t the “Yo, ho, ho and a bottle of rum” kind of pirates, but a modern version, who are frequently more like terrorists.
To combat the menace Lloyd’s announced on its Website (www.lloyds.com) that a new “set of clauses have been made available for use on marine hull and hull war policies held by shipowners to cover piracy risks. Use of these new clauses will clarify the situation for policyholders and insurers as piracy and terrorism will be covered by the same policy.”
The announcement said the “changes have been made to reflect the difficulty in distinguishing between pirate and terrorist attacks as pirate attacks have become more violent and sophisticated. This has led to an increased risk of disputes over who should pay up when a ship is attacked in the event that the motive for the attack is unclear.
“The clauses, drawn up by the London Market’s Joint Hull and Joint War Committees allow for the removal of piracy and some other similar coverage from the hull policy, and their reallocation under the war policy.”
Neil Smith, manager for Marine, Aviation and Transport for the Lloyd’s Market Association (LMA), which provides the secretariat for the two committees, indicated that the changes will clarify the situation for policyholders and reduce the possibility of disputes between insurance carriers should a claim occur. He said they were made in response to the evolving nature of modern piracy.
“In the past, piracy has not been a substantial economic issue for insurers,” he explained. “While insurers were aware of the incidents, thankfully they have not led to major financial losses. The method of operation of many of these gangs has been of general concern for some time, but the increasingly sophisticated methods and equipment used by these gangs have heightened fears that one of these incidents may lead to a major loss for underwriters.”
Lloyd’s also cited a report issued by the International Maritime Bureau (IMB) earlier this year that showed an increase in the levels of violence used in attacks by pirates throughout the year. Somalia, Tanzania and Vietnam were all cited as countries where there have been large increases in the numbers and severity of attacks, and areas where the IMB would like to see regional law enforcement agencies increase their efforts to combat the problem.
Smith said the new wordings had been issued in October and were available as an option for underwriters and assureds on an ongoing basis