Daily Independent (Lagos)
Sola Alabadan
30 June 2009
Lagos — The continued increase in marine insurance premium has been blamed on the activities of pirates operating off the coast of Nigeria as the cost of insuring ships against piracy has increased drastically since the beginning of the year.
Marsh & McLennan, an insurance broker, who made this revelation in United Kingdom, also blamed the 20-fold price rise on a spate of pirate attacks off the coasts of Somalia and Indonesia.
Attacks on vessels doubled during the first quarter of 2009, triggering extensive insurance claims and hefty rise in premiums.
Pirates are becoming increasingly audacious, hijacking boats up to 700 miles offshore.
Markus Baker, head of marine insurance at Marsh & McLennan, said shipping firms that were paying 0.05 per cent of the value of their goods for insurance premiums are now paying as much as 0.1 per cent.
"Piracy is a pretty challenging piece of risk to underwrite," Baker said.
Faster ships are cheaper to insure, Baker added, as they are more challenging for pirates to attack.
"Anything over 14 or 15 knots tends to be fast as far as the pirates are concerned," he said.
Security costs have also increased, with the owners of tankers and container ships now spending up to $40,000 (E24,000) per passage on security guards.
Early in the year, Munich Re has said it expects insurance premiums against sea piracy to rise following a spate of pirate attacks off the Somali coast.
Dieter Berg, Munich's head of marine insurance, told Reuters that insurance rates are rising in all markets - marine insurance being no exception.
Payouts from current claims are pushing premiums up, Berg said.
He added that the risk of piracy is increasing despite naval ships being sent to patrol the Somali seas.
Attempts to hijack ships could spread to other areas of the world, such as the east coast of Latin America, and Southeast Asia, Berg warned.
The business model used by the Somali pirates could become popular around the world, he said.
In a similar vein, Aon Risk Services has reported that ship owners navigating the Gulf of Aden are seeing insurance premiums for kidnap and ransom (K&R) rise tenfold.
Some could therefore be paying a premium of $30,000 for $3 million of cover during one journey across seas that have become treacherous because of the activities of Somali pirates.
According to the company, more operators are opting to buy the insurance rather than risk the lives of crew or make lengthy detours that threaten supply chains and increase costs.
The specialist policies can include cover for consultant and negotiator fees, ransom demands and medical care.
A spokesman for Aon's crisis management team comments: "The cost of insurance is simply rising in correlation with the risk of kidnap in piracy hotspots. Despite the presence of naval ships, the spate of piracy attacks over the last six months does not seem to be abating with increased civil unrest and pirates' easy access to rocket launchers and AK47s. As such we've seen enquiries for cover escalate as ship owners seek to protect their employees and businesses."
Aon estimates that 70 per cent of ship owners are opting for localised policies for the Gulf of Aden, the Gulf of Guinea stretching down to Somalia and the Straits of Malacca while a third of policies placed by Aon cover all locations worldwide.
Be the first to Write a Comment!
Copyright © 2009 Daily Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
