Piracy Attacks Boost Demand for Kidnap & Ransom Coverage
Pirate attacks on the world’s shipping have been increasing at an alarming rate. “Last week the Piracy Reporting Centre (PRC) confirmed a dramatic increase in piracy attacks on merchant vessels in the third quarter of the year,” notes a report on the Lloyd’s web site (www.lloyds.com).
Fueled by fears for their crews and vessels, ship owners are turning to specialist kidnap and ransom insurance cover to meet the costs of recovering them. The International Maritime Bureau (IMB) describes the increase in piracy incidents as unprecedented.
It also cites “an intensification in the nature of the attacks, such as the violence of the assaults as well as an increase in the numbers of hostages taken, and the amounts paid in ransoms.”
The IMB says 199 incidents were reported to the PRC in the first nine months of 2008. This breaks down to 83 in the third quarter of 2008 alone. That’s a substantial rise on the 53 and 63 attacks in the first and second quarters of the year respectively.
The PRC also reported that 581 crewmembers were taken hostage, nine kidnapped, nine killed and seven missing and presumed dead. There were 115 vessels boarded, 31 hijacked, and 23 fired upon.
According to the IMB, the Gulf of Aden and East coast of Somalia rank as the world’s number one piracy hotspot with 63 incidents reported, accounting for almost a third of the overall reported attacks. Nigeria and Indonesia are second and third respectively.
The IMB says 26 vessels were hijacked by Somali pirates in the first nine months of this year, with 537 crew members taken hostage. A further 21 vessels were fired on by Somali pirates in the same period.
As of 30 September 2008, there were still 12 vessels under negotiation with over 250 crew held hostage.
Lloyd’s noted that at a seminar it held in mid-October,” Amlin’s Simon Beale advised ship owners to switch piracy from hull cover to war to ensure a greater degree of financial support.”
Guillaume Bonnisent, K&R underwriter with Lloyd’s insurance group Hiscox, said ship owners are also in search of specialist kidnap and ransom cover. He indicated that, “we’ve had over 50 different broking firms worldwide approach us on behalf of owners and managers seeking protection for vessels. Without a doubt the surge in piracy activity in the Gulf of Aden has been the catalyst for this increase.
“Traditional marine cover will meet the cost of the ransom but none of the costs involved in the process. What we’ve found is the ransom can account for just 25 percent to 30 percent of the costs of the incident. Where K&R cover goes above the traditional marine policies is that it will become involved from the moment a vessel is seized.
We’ll provide a crisis management team and meet the costs of the security team that’ll be needed to take the ransom to the Somali pirates.” He added that the security team’s fee can be more than the value of the ransom.
Source: Lloyd’s