Kidnap Insurance Costs Soar Tenfold in Gulf of Aden on Escalating Piracy

Shipowners navigating the Gulf of Aden are seeing insurance premiums for kidnap and ransom increase tenfold as piracy escalates, said Chicago-based global insurance broker Aon Risk Services on Thursday, April 9, 2009, one day after Somali pirates hijacked a U.S. cargo ship.

This means shipowners could be paying 30,000 U.S. dollars premium for 3 million dollars of cover for one journey through this piracy hotspot. However, more are opting for cover to protect their employees as well as avoiding lengthy detours that threaten supply chains and increase petrol costs, reports Xinhua.

Specialist piracy policies for kidnap and ransom insurance can include cover for consultant and negotiator costs, ransom demands and medical care. These can be bought for individual transits or on an annual basis to bring down the cost. "The cost of insurance is simply rising in correlation with the risk of kidnap in piracy hotspots.

Despite the presence of naval ships, the spate of piracy attacks over the last six months does not seem to be abating with increased civil unrest and pirates' easy access to rocket launchers and AK47s. As such we've seen enquiries for cover escalate as shipowners seek to protect their employees and businesses," said Ashley Leszczuk, an analyst from Aon's crisis management team. Aon indicated that some 70 percent of shipowners are opting for localized policies for the Gulf of Aden, the Gulf of Guinea and the Straits of Malacca while a third of the policies placed by Aon cover all locations worldwide. While a US congress study states with just over 30 mio US $ almost correctly the real ransom paid to Somali pirates in 2009, many sources quote Kenya's Foreign Minister falsely who had stated that 150 mio US$ had been paid. What the minister tried to state was the total amount, which was paid in these piracy cases. So the question is, who got the 120 mio US$ the pirates didn't get? Case-affected insurers shovelled some from their right to their left pocket, but the direct bagging is done by lawyers and their affiliates in the risk-management industry.

Some reports are stating that even fraudulent ship owners and managers, crooked diplomats and colluding ship-captains are in on the take. And this not just concerning old vessels, which were on their way to the scrapyard anyway and are used for this last insurance-fraud and voyage into the easy money - no - especially concerning latest near-billion-dollar vessels the piracy-derivatives merry-go-around seems to be the latest game of the rich boys from the shipping club and their colluding buddy-buddy networks. The biggest winner overall is certainly the insurance industry and the biggest looser (isn't it always?) the taxpayer. Since now in addition the taxpayer has to foot the bill for naval war-games under the pre-text of ill-conceived anti-piracy missions, the paying citizens of this world should finally start to ask themselves for how long this nonsense must be financed from their crumbling incomes.

The only lasting and therefore only rightful solution is to help to end this increasing craziness by a quantum leap and allowing outside-of-the-box thinking to be implemented.

Source: ECOTERRA Intl., April 10, 2009

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