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Scourge of piracy of concern to insurers


January 19, 2009   by Canadian Underwriter


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The scourge of piracy on the international high seas in 2008 reached a new, alarming dimension, according to recent reports by Munich Re and the Piracy Reporting Centre (PRC).
The PRC is part of the International Maritime Bureau (IMB) of the International Chamber of Commerce (ICC).
“In 2008 there was a worldwide total of 293 incidents of piracy against ships, which is up more than 11% from 2007, when there were 263 incidents reported,” the PRC reported in a press release. “In 2008, 49 vessels were hijacked, 889 crew taken hostage and a further 46 vessels reported being fired upon.
“A total of 32 crew members were injured, 11 killed and 21 missing – presumed dead. Guns were used in 139 incidents, up from 72 in 2007.”
Somalia and Nigeria were listed as the two most likely spots where piracy was most likely to occur.
But piracy figures are not always reliable, because many pirate attacks go unreported, Munich Re notes in a special report entitled Piracy Reaches New Dimensions.
“Keeping statistical records of piracy is very difficult,” Munich Re notes. “Shipping companies report only a fraction of the actual cases for fear of their ships being impounded for long periods or because they simply do not want to pay the resultant higher insurance premiums.”
The IMB, a department of the ICC specializing in crime at sea, puts losses from piracy in 2007 alone at some €13 billion.
Munich Re notes that most losses due to piracy are covered by some form of insurance. For example, losses attributable to piracy primarily affect marine hull, marine cargo, and protection &indemnity (P&I) insurance. Losses may also be indemnified under loss-of-hire (LoH) insurance.
Special kidnap and ransom covers are also offered to ship owners.
“Munich Re views current events with growing concern,” Munich Re says in its report. “Even if piracy only accounts for a very small portion of marine insurance business, the potential perils are enormous.”
For example, the reinsurer notes, when a ship is attacked, the hijackers frequently just lock the crew in the hold and leave them to their fate. “If the ‘rudderless’ ship then collides with a tanker, we are talking about losses of enormous proportions.”
Munich Re suggests a number of ways to repel pirate attacks, including special sprays that make the deck so slippery that attackers just cannot keep their footing.
“Another option is sonic blasters, which emit a deafening sound,” the report says. “This alone can sometimes be enough to send the pirates packing.
“Some ships also have so-called ‘panic rooms,’ where the crew can ensconce themselves in the event of a pirate attack.”