Piracy Remains a Concern Says Lloyd’s

August 24, 2009

The news media sometimes neglects important events in an effort to avoid overexposure. But when a new twist occurs, the media returns to the subject with a vengeance. The latest example is the extensive coverage given to the hi-jacking of a Russia vessel in the Baltic, which was eventually recovered in the Atlantic.

While that is a legitimate news item, it somewhat diminishes the real and far more serious problem of piracy in the Gulf of Aden. At least that’s the conclusion reached by Lloyd’s of London in an article on its web site – www.lloyds.com.

Piracy around the Horn of Africa hasn’t gone away. In fact pirate attacks around the world have more than doubled, to 240 from 114, during the first six months of this year compared with the same period in 2008, according to the ICC International Maritime Bureau’s Piracy Reporting Center. The increase is almost entirely due to Somali pirate activity in the Gulf of Aden and off the east coast of Somalia, with 86 and 44 incidents reported respectively, the report said.

The year’s second quarter saw 136 reports of piracy compared with 104 in the first three months of 2009, an increase of almost a third.
A total of 78 vessels were boarded worldwide, 75 vessels fired upon and 31 vessels hijacked with some 561 crew taken hostage, 19 injured, seven kidnapped, six killed and eight missing.

The attackers were heavily armed with guns and knives in the majority of incidents. “Violence against crew members continues to increase,” the report concluded.

Naval patrols have made it more difficult for the pirates in the Gulf of Aden, but, as a result, they are now operating further afield, notably in the southern Red Sea and the east coast of Oman. The IMB report said that attacks off the eastern coast of Somalia had decreased in recent months after peaking in March and April, with no attacks reported in June.

Lloyd’s notes that the EU’s NAVFOR task force is helping to curb piracy, according to Clive Stoddart, executive director of Aon’s kidnap & ransom team, but with limited success. “Pirates have responded by picking their targets more carefully and/or abandoning their efforts when the navy appears,” he explained. “But this is a vast area of sea and evidently very difficult to police effectively.”

Most experts agree that the only sustainable long term solution to piracy in the region is a fully functioning government in Somalia. However, given the country’s chaotic political situation – the central government has no control in Puntland, the part of Somalia which is the center of pirate activity – it isn’t in a position to effectively curb pirate attacks.

The fall off in attacks during the summer months is mainly due to difficult weather conditions. The anticipated resumption of pirate activity will concentrate ship owners’ minds on their insurance arrangements, according to Aon’s Stoddart. “The marine market continues to cover traditional marine risks and is now charging for the increased war exposure in the region,” he added.

But the scale of the piracy problem is testing traditional market practices, especially the so called ‘general average’ process, whereby a ship owner whose vessel has been hijacked seeks compensation from different parties, including insurers. A ship owner and a Chinese cargo shipper are currently in dispute over how a $1.8 million ransom and substantial related costs should be repaid.

“Even though forms of piracy have been in existence for ever, the cost and complexity of the negotiation and delivery of ransoms to Somalia is new to the traditional marine insurance market,” Stoddart continued. “The Lloyd’s kidnap & ransom market is responding to the situation by offering cover and access to advice not offered by the marine market. This has already helped to avoid waiting for the outcome of general average which can be costly in terms of both time and money.”

Source: Lloyd’s

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