Tagged: charterer, Gulf of Aden, Hull and Machinery, piracy, shipowner, Somalia, war

There is an expectation that insurance premiums are due to rise as marine piracy continues to affect major shipping routes. Whilst the increase in naval presence has helped lower the rate of attacks, there have been a number of high profile pirate attacks on vessels transiting the Gulf of Aden which have been settled via million dollar ransoms.

As we wrote in our opinion piece Piracy – How Covered are You?, the methods and style of piracy have moved on from its “traditional” routes where pirates would board ships and steal cash and equipment. This didn’t present any particular problems for insurers. The new method sees Somali pirates only interested in the ransom, demands for which have run into the millions of dollars, and it is the settlement of these ransoms that are likely to push premiums higher.

There are further fears that the Somali methods of hijacking will spread to other regions, including South East Asia and Latin America. Whilst this is possible, current circumstances suggest the need for a specific set of geo-political characteristics to make this work, i.e. a sea lane near land in calm waters without any issues as to sovereignty, a passive government or legislature, a lack of concern of that government of outside pressure to take action, and an inability of external governments to take action.

However, if other hot spots were to occur, then we would likely see a quicker shift of Piracy from the Hull to the War policies. Whilst there is the increase in premium to contend with, there is also the question as to who is going to pay for it.

It means owners and charterers should be paying increased attention to their War clauses and obligations under the charterparty, and account for the increases accordingly, irrespective of the anticipated trading pattern.

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