(With agency report)
Shipping companies, including those who sail to West African ports and who are already smarting from the global economic downturn are forced to part with extra cash for steeper premiums to cover multimillion-dollar ransoms or take the long way around the African continent in the hope of dodging hijackers. “The pirates were the only people who had a good year in 2008,” said Crispian Cuss, a security consultant with the Dubai-based Olive Group.
The Gulf of Aden, which connects the Indian Ocean to the Red Sea and the Suez Canal, is one of the busiest and most dangerous waterways in the world.
As pirates become more aggressive, the cost of insuring ships climbs. Some companies are spending more time training their crews, others are avoiding the area altogether – taking long trips around Africa’s southern tip that can potentially add millions to the cost of each journey.
While the coast of Somalia has been a problem for years, it was flagged in May as an area of particular concern by Lloyd’s Market Association, and premiums have been rising – at least tenfold, according to some media reports.
Large ships generally carry three types of insurance. Marine – or hull – insurance covers physical risks, such as grounding or damage from heavy seas. A second type of policy, protection and indemnity covers crew issues, while war risk insurance covers acts of war, insurgency, and terrorism.
Although war risk policies typically cover hijackings and piracy, insurers often charge extra for ships that venture into high risk areas such as the Gulf of Aden which leads to Nigerian and other West African ports.
Others, including Chicago-based Aon Corp and London’s International Security Solutions Limited, have recently launched new plans specifically tailored to cover losses incurred by piracy – for example by including ransoms and cargo delays under the same policy.
(See full story on page 10)