Category Risk Management

Precautions against piracy

16 November 2011 Alexander Forbes Risk Services

As piracy spreads unchecked insurers, ship owners and charterers are evolving new approaches to managing the risk. This is despite the vacuum created by both the law and the lack of international co-operation or political will that, arguably, lead to the problem in the first place.

According to Geopolicity, a management consultancy, the cost of piracy to the international community is between US$ 4.9Bn and US$ 8.3Bn each year. While Ince & Co, a law firm, reports that the average ransom per vessel hijacked is in the region of US$ 4 million, the length of time that ships were held prior to payment dropped from 214 days in February 2011 to 190 days in March - in line with the pirates stated intention to free up space at their anchorages.

While Tracy de Kock, Manager, Business development, Marine, Alexander Forbes Risk Services believes that “war risks cover combined with a kidnap and ransom product remain the marine fraternities’ best protection against the cost of piracy,” there are a number of additional measures that ship owners or charterers can adopt to minimise the chances of falling victim to piracy and reducing the cost of war risks cover.

These include:

· The purchase of in convoy kidnap and ransom cover
· Transiting known pirate waters at an increased rate of knots if possible
· Carrying armed guards on board. This option is being adopted by more and more vessel owners.
· Razor wire or water hoses to protect the ship from illegal boarding.
· A fully equipped citadel, namely, a designated area specially built in to a ship where the ship’s crew can take refuge if the vessel is boarded by pirates.
· Adherence to piracy best management practices. The document, BMP4 (Best Management Practices for Protection against Somalia based piracy), is available on the internet. Even though BMP4 deals largely with piracy originating in and around Somalia, most of the principles are relevant to other regions affected by piracy.

While a number of organisations offer marine security services these have a limited track record and “operate in the ill-defined space between national and international waters - and the murky no-man’s land between specific national, international and global legal jurisdictions” warns de Kock.

So, given the lack of legal certainty, international cooperation and a concerted military response the best option available to ship and cargo owners, charterers and crews is “a good war risks policy combined with separate kidnap and ransom cover while taking cognisance of whatever additional speed, ship design and security measures can be added” concludes de Kock.

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