Piracy risk should be covered under war policies, not hull policies

Piracy risk should be removed from general hull and machinery policies and placed with war insurance policies, a report from Allianz says.
In the report, Piracy: An ancient risk with modern faces, Dr. Sven Gerhard, global head of hull insurance at Allianz Global Corporate & Specialty, suggests there are several problems with including piracy risk in general hull and machinery policies.
These problems include the fact that hull and machinery policies charge a fixed price year on year, irrespective of a vessel’s risk of coming under a pirate attack, Sven said.
With war policies, on the other hand, the level of risk (as well as level of coverage) can be underwritten with more flexibility, and as a result more flexibly priced.
War risk policies typically are paid per transit, and underwriters often charge additional premiums for trips through high-risk areas, the report said.
“There are a lot of shipping companies out there that are paying for piracy cover that do not need it as part of their hull and machinery policies,” Gerhard said.
“Conversely, there are a lot of vessels that are exposed to high levels of piracy risk because of the routes they travel that — under current underwriting — cannot arrange more flexible, individually suited piracy coverage because it is part of their general hull and machinery policies which have fixed terms and prices.”