Marine K&R premiums rise tenfold on Somali pirate threat

by Gill Montia

Story link: Marine K&R premiums rise tenfold on Somali pirate threat

Aon Risk Services has reported that shipowners navigating the Gulf of Aden are seeing insurance premiums for kidnap and ransom (K&R) rise tenfold.

Some could therefore be paying a premium of $30,000 for $3 million of cover during one journey across seas that have become treacherous because of the activities of Somali pirates.

According to the company, more operators are opting to buy the insurance rather than risk the lives of crew or make lengthy detours that threaten supply chains and increase costs.

The specialist policies can include cover for consultant and negotiator fees, ransom demands and medical care.

A spokesman for Aon’s crisis management team comments: “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.”

Aon estimates that 70% of shipowners are opting for localised policies for the Gulf of Aden, the Gulf of Guinea stretching down to Somalia and the Straits of Malacca while a third of policies placed by Aon cover all locations worldwide.

Over the Easter weekend, the captain of the Maersk Alabama was rescued after being taken hostage by Somali pirates, three of whom were eventually shot dead by snipers on the USS Bainbridge.

The American warship had the lifeboat containing Captain Phillips and his captors in tow, after it ran out of fuel.