Piracy:Insurance premium rises to $1.5m

Saturday December 13 2008

By PAUL REDFERN

Ship owners are having to pay up to $1.5 million a vessel to insure ships sailing up the coast of Somalia and through the Gulf of Aden.

According to the Times of London, while costs vary according to the route taken and the value of the ship’s contents, a single journey has pushed insurance rates to astronomical levels because of repeated Somali pirate attacks in the region.

The high cost of insurance coupled with the risk of ransom payments if the vessel is seized has led a number of shipping companies to opt for the long and expensive but safer journey round South Africa rather than risking the route through the Gulf of Aden.

And although Western countries agreed to beef up their naval presence under the UK command in the Gulf region this week, some companies are now taking up piracy insurance policies to cover their vessels in the event that they are seized.

The Times reported last week that a risk consultancy firm with close ties to the Lloyds insurance market is offering the world’s first shipowners insurance policy covering potential ransom payouts on crew members who have been kidnapped.

International Security Solutions Ltd, a London-based company, is offering policies to indemnify shipowners from losses related to paying a ransom for the release of crews who have been kidnapped.

Between 12.5 per cent and 25 per cent of the premium paid is returnable to the customer if no claim is made, the report said.

The founding director of the firm ISSL, John Wick, who is offering the insurance, said that shipowners have “a moral responsibility to look after their crews.”

He added that as well as arranging insurance, his company would provide risk-management advice, including training crews and providing “target hardening” of vessels, making them less vulnerable to being hijacked.

Such “target hardening” includes a “long range acoustic device,” which fires a non-lethal blast of sound at would-be attackers at levels of up to 151 decibels, louder than standing behind a 747 jet during take-off.

Other defences being considered by ship owners include high pressure water hoses and electrifying the perimeter of a vessel.