Increased piracy activity off the coast of Africa has resulted in pressure on shipping insurance according to the international specialist insurance group, Hiscox, with a presence at Lloyd's.
Recent events in the Gulf of Aden and off the coast of Somalia have brought the issue of piracy to people’s attention, with the capture of the oil tanker Sirius Star making front page news.
The Sirius Star—the biggest tanker ever hijacked—was carrying approximately $100m worth of oil to the US when pirates hijacked the ship in an area previously thought to be too far out to sea for them to reach.
Brendan Flood, marine underwriter, for specialist insurer Hiscox said: ““This is an unprecedented attack, given the size of the ship and the fact it was so far from the traditional hunting ground of Somalian pirates. Despite the best efforts of the international military task force the logistical challenge of policing an area which, as this latest attack has demonstrated, is now more than a million square miles of ocean, is enormous."
Flood went on to talk about the effect this attack, and another several days later on a Chinese transport, would have on the insurance industry.
“With the general situation having deteriorated so quickly, insurance premiums for the hull, cargo and crew for vessels taking this increasingly dangerous route will be under pressure and will need to be reassessed.
"However, it’s exactly this type of volatility that the London insurance market is well experienced in responding to and is continuing to provide cover for ship owners.”
Neil Smith, Senior Manager at the Lloyd’s Market Association, believes that insurance and government needs to work together to address the issue.
“Insurers are very concerned about the ongoing situation, as are the whole shipping community," he says. "Insurers alone cannot act to resolve the problems, it will take a collective political effort on behalf of global governments to address the political situation in the area.
"Such activities obviously take time to come together. Underwriters have met with Government representatives on a number of occasions, the UK Government is aware of the problems and is taking a lead within the EU on providing an expanded naval presence in the area."
This statement was echoed by Lloyd’s, with Lord Levene saying: "Incidences of piracy in the Gulf of Aden and off the coast of Eastern-Africa have been increasing since 2005, but the number and scale of recent attacks is a real cause for concern.
'Lloyd’s recently co-hosted an event with NATO where we discussed the issue of energy security and in particular the ongoing and increasing threat of piracy. There is no doubt that this is now a key issue for businesses, insurers and the military.
'We hope that the combination of EU and NATO action can mirror the success of dealing with piracy in the Malacca Straits. Further investment and closer co-operation between industry and governments internationally will be vital to defeat this threat in the long term.”
Guillaume Bonnissent, kidnap and ransom underwriter for Hiscox, said that training for piracy attacks is still the best form of prevention.
“From a risk management perspective ships transiting through Suez and the Gulf of Aden need to ensure they take basic precautions. The best security is to ensure the crew is trained to deal with a crisis and that they start evasive measures as soon as they see the pirates.
"Having security personnel on board can also assist the crew in making sure that the pirates don't get on board without the need for the crew to resort to lethal weapons. Insurance cover is available as a safety net, but the best form of protection is to prevent the pirates boarding in the first place.”
