Cover Your Cargo Against Pirates

With reports of eight vessels being seized in the past two weeks alone, it is clear that piracy is becoming an increasing concern along Africa’s coastline. Business owners and company executives should therefore not underestimate the financial risk that they are putting their companies in by failing to correctly insure cargo.

It’s not only bulk oil that is at risk,” says Elesh Bisla, head of marine insurance at Lion of Africa. “Pirates will highjack R50 million yachts as well as ships with various cargo containers because the ransom is more important to them than the contents.

“Often the pirates don’t even know what is on the ships. However, if the ship owner refuses to pay the ransom, and your cargo is in one of the containers on that particular ship, you can lose a great deal of money if the pirates decide to destroy or steal the cargo in the containers, and you do not have adequate marine insurance in place.”

He says that at the same time that piracy is on the increase, global economic woes are forcing companies to cut costs and insurance expenditure is often the first under the knife. “But if you lose your cargo to pirates and have inadequate or no insurance, you also have no recourse to action. Very few companies can afford to sustain those kinds of losses.”

“Many companies are rerouting their cargo past the Cape of Good Hope, willingly increasing shipping time and expenditure, in the hopes that the cargo will reach its destination. However, this makes South Africa the next potential hot spot for pirates, making it vital for companies to ensure that they have adequate cover,” says Bisla.

“Standard marine insurance does cover piracy and it is possible to get a policy that covers both the cargo and the ship. However, in South Africa, companies typically only need to cover their cargo as it is transported by independent shipping companies. These large ships are generally covered by Lloyds in London because of the substantial value of the hull.

He says another concern is that marine insurers don’t always fully understand the risks faced by companies transporting goods by sea. “It’s important that you find an insurer that takes into consideration all aspects of the risk and advises accordingly on things that can go wrong.”