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LONDON – As brazen attacks by Somali pirates continue to attract headlines, modern-day Jack Sparrows aren’t the only ones who see plundering ships as a lucrative business.
Kidnap and ransom insurance is now a booming industry with shipping firms paying tens of thousands of dollars per journey to ensure that their vessels, cargos and crews return home safely.
The average ransom for a seized ship doubled from $1 million in 2008 to more than $2 million last year and has continued to increase in recent months, industry experts say.
Pirates of the 21st century quickly realised that insurance companies entering their “business” made it easier for ransoms to be obtained. This also gave the well-armed raiders the opportunity to ask for more cash, creating a cycle that is hard to break, according to Pottengal Mukundan, the director of the International Maritime Bureau.
'Increased competition'
And while shipping firms and insurance companies know they might be encouraging piracy in the long-term by paying huge ransoms, there is a pressing short-term need to free seized crew members, says Professor Roger Middleton, a consultant researcher on the Africa program at London-based think tank Chatham House.
But even though ransoms are rising, insurance premiums are going down. “Growing numbers of insurers are trying to enter the piracy market which increased competition initially and drove down premiums,” said William Miller, divisional director of Willis Group Holdings’ kidnap & ransom unit.
Premiums for a single high-risk journey typically range from $15,000 to $30,000 depending on the sum insured. However, the speed and size of a vessel also comes into play. Insurers also offer discounts of up to 15 percent for ships featuring on-board anti-piracy measures such as razor wire.
“The number of annual transits through high-risk areas like the Gulf of Aden compared to the number of vessels seized implies that the overwhelming majority of ships complete their journey incident-free,” Miller added. “Nevertheless, pirates do make successful hits from time to time -- hitting insurers with claims.”
Experts expect attacks to increase this month as the monsoon season ends and it would appear there is much more money to be made by both pirates and insurers.
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Well you learn something new every day - what an interesting article
Until Somalia has a stable government and military the piracy will continue.
If they pay the ransome they only encourage more attacks. Piracy attacks must be met with swift and overwhelming force. Shipping companies may take greater risks and shortcuts through known pirate operating areas because they have insurance. You cannot negotiate with terrorists, pirates are terrorists.
Unless this is addressed by the government with clear actions and accountability it will continue and even escalate. I agree with NVArt, until the internal problems are addressed, any attempt at mediating this issue will fall apart from the unstable platform of the country. This article is a bang on example of how internal issue of a country is dramatically affecting international commerce and trade; thus giving other countries an incentive to put into effect sanctions or lobby pressure toward positive change.
Who would want to sort out the problem in Somalia though?
I think they need outside help to sort themselves out - but is extremely rough there.
That is exactly what I mean. Internationals doing business or shipping companies who generate high levels of income could lobby to their own governments to action change. In order to protect their interests, they would be willing to get involved in the internal politics of a country (i.e. Iraq). We need more excellent articles like this to generate interest and educate the public.
If there is the opportunity for profit, it will be found.
In this situation, that would not be so bad.
The consequences of a corrupt government are devastating on the innocent nationals. Now that this is affecting other countries, I wouldn’t mind if they tackled corruption whether it is for their own benefit/profit or not. The result could be positive for those in Somalia.
It would be cheaper to hire security personnel with automatic weapons, grenade launchers, and other sophisticated equipment on board ships passing through that area of the world. The result would be less pirates to contend with.
That would be illegal.Besides the ships owners merely pass the costs on as operating expense.Everyone makes money and we pay a few cents more at the pump.
When the heads pop over the railing put one between the eyes, keep doing it until they quit. Say nothing to anyone about feeding the sharks (there are plenty of sharks to go around in those waters). After while pirates will be drawing straws to see puts the head up first. Over time everyones happy and problem solved!
This is silly, these commercial ships should be armed. With personell standing 24 hr shipboard watches. A bunch of Idiots with AK's and RPG's in Dingys should not be able to take over these huge shipping vessels. If I had the money I would put together a Pirtate hunting vessell and charge people to go on pirate hunts. If any readers think that this is a good idea and has the means email me. I've been on ship to ship combat in the Gulf in '88 it was a blast.. (gunner on a 25).
You are truly sick!
Vietnam '66 CVA-64
Great idea,shoot them down like killing a bad dog and the crap will stop and the straws will get shorter and shorter
Vet4u
Against the pirates or the insurers? Any way the insurance people can make a buck. jeeeeess
Where do I volunteer ..give me a B.A.R. Put a round through their out board and they become sitting ducks
Keepertrout: You can have the field work with the pirates, I want the insurers; They're as much leeches as these pirates, in some cases even more so, the pirates do it to eat; insurance companies because they see a way to screw more money out of their clients. (Only to tell them in the event of a claim, that piracy by a non American wasn't covered or some such)
In open seas the shipping lines should arm thier crews or hire professionals to protect them. Once again soft hearted hummanitarians do not know how the real world works. Get tough, sink boats, preemptive strikes against mother boats.
How am I not surprised. Pirate insurances, sounds like a pyramid scheme.
The good hearted humanitarians are the reason why commerce cannot push through their agenda at the expense of human life.
A band-aid fix or the availability of band-aid fixes is the reason these problems escalate to such level.
Political and media awareness, economic sanctions against the government and international pressure is what is needed to fix this specific problem whilst addressing the atrocity and injustice of the Somalian government.
Rather than taking a narrow view focusing on profit and specific tasks (problem of pirates) we should be taking a wide view and trying to address the underlying issues which has led to this problem. There is a reason why pirates do not exist in areas with strong governments. They are not impossible to deal with, it is just the government chooses not to deal with it. The key is government accountability.
Selin, do you remember a movie called BLACK HAWK DOWN? Do you know anything about where that took place? A bunch of Somali warlords took on an ineffective American government and its leaders, and gave this country a big black eye. International sanctions failed miserably, and continue to do so.
These warlords are stealing food from the mouths of their own children, to feed their own egos, and continue to increase their personal power.
They can not be dealt with in any humanitarian manner. The only thing they understand is absolute force.
Their culture is theft and murder to accomplish their personal aims, regardless of consequences to anyone else. And these are the same people now embroiled in the upswing in piracy, as an easier way to get rich at someone else's expense. (Sounds a lot like the inner city gangs, but, the majority of them have some semblance of loyalty to their fellow gang members. About as much as our elected members of congress.)
Just like the medical scam insurance companies want you to believe they lose money.....but look at the bills, thye pay the hospital what they want and that's all they get. So here they collect and pay out, collect more then you pay out and no end in sight.
Money grubbing insurance companies, only thing that is more corrupt; LAWYERS.
arm the dam ships,if they dont alow armed ships into some ports screw those ports.If they need the cargo bad enough they will find a way.hell place a armed escort ships to protect them.do something.If that doesnt work tell them to come and get their own food ,with their own ships,with their own crew......
Hairy
Yes I agree, it would be a whole lot less expensive to hire a handful of skilled marksmen as protection on board every ship.
The problem is jurisdiction. If you harm these people you can be jailed or shot in a lot of areas.
The U.S., Britain, France & a Few others have actually captured Pirates only to have them turned free by the Courts. Seems in most cases that attempting to take over a Ship isn't Illegal. You can only make charges stick if they succeed. SO MUCH B.S.
Get me a well trained Ships Crew that just Happens to Trained Marksman that will keep there mouth shut. You Know. Like What Happens In Vegas, Stays In Vegas. Provide Bonus Pay for Unspecified Work. Feed The FISHES. No BODY- No Evidence- No Crime.
Liked China's Answer a few Years ago when they we're having Piracy Problems along part of their Coast.
The Determined that a particular Village was involved along with the Coast Guard Crew stationed there. Ship Captains are less weary when hailed by a Coast Guard Boat. That's why they were so successful. Partly how they were caught.
ANY WAYS, They I.D. Every one involved. Arrested Them and took them to the Center of the Village.
They Then Read Them The Charges. Read Them Their Rights. AND SHOT THEM! The Piracy Stopped!
There are many defence devices as in Sonic units and Microwave systems that don't kill but cause exteram pain. When one is trying to cover ones ears it is impossible to hold on to a AK47.
If the ships are armed they become warships and that makes them uninsurable. Wonder if the insurance companies are behind the pirates?
Same basic problem since man started moving goods through the waters. Just like nature develops bees to sting, snakes to bite and plants to kill it's all in the names of self defense. Men have to eat and provide and unfortunately stuff like this will continue, it's the have's and have not's. How to fix it, well I sure would not grab a bee, touch a snake or eat a plant knowing that it might kill me.