Tagged: General Average, Gulf of Aden, Hull and Machinery, kidnap & ransom, Maersk Alabama, P&I, piracy

The Maersk Alabama made the news for many reasons after it was attacked by pirates recently, not least because it was the first American-flagged vessel to be hijacked in the Gulf of Aden. The crew was able to recapture their vessel, but the captain was taken as sole hostage on a lifeboat at sea.

Uniquely, there was no longer a vessel or cargo being held for ransom.   The captain was now the only hostage, but within a standard (UK or American Institute or Norwegian Plan) Hull and Machinery policy there is no specific cover for ransom payments made specifically for the crew. This is also the case for P&I policies.

A ransom is only covered by existing H&M policies in a General Average claim if the pirates do not specify the amounts for the separate release of the crew, cargo and vessel. This usually does not present a problem because the pirates tend to take the crew hostage as part of the vessel hijacking and effectively hold all parties to ransom for a single amount.

However, in this instance, the pirates’ demand for a ransom was only tied to the holding of the captain on the drifting lifeboat. It would therefore be difficult for a shipowner to recover an insurance claim for the ransom, when the hostage was being held away from the vessel itself. If the ransom was paid, the owner would have to submit the claim to their P&I Club, likely under the discretion afforded by the Omnibus Rule.

On this occasion, the US navy launched a successful operation and rescued the captain so we do not know how the situation may have unfolded had the shipowner entered into ransom negotiation talks.

Moreover, the recent attacks on the American-flagged Maersk Alabama and the two French yachts have seen the respective navies taking military action against the pirates to secure the release of the hostages, whereas previously ransoms were paid.

According to mainstream media, the immediate effect of this action appears to be retaliatory. From an insurance perspective, we are likely to see an increase in premiums for vessels transiting the area as the risk of violence escalates even further.

Unless the shipowner had specific Kidnap and Ransom insurance, any claim made to cover the ransom for the crew would only be at the discretion of the P&I Clubs’ board and only then if it was an International Group Club.

If any party is interested in learning more about what is covered under their existing Hull policies and what additional services Kidnap and Ransom insurance provides, please do not hesitate to contact any one of our shipping team to discuss further.

 Print This Post