Piracy triggers tenfold premium increases
A spike in piracy incidents has seen kidnap and ransom insurance premiums increase tenfold since last October, according to Aon Risk Services. And Australian shipping is being affected.
In the past three weeks there have been 12 hijackings of ships off the coast of Somalia and along the busy Indian Ocean shipping lanes.
Aon says shipowners are paying $US30,000 ($41,500) in premium for $US3 million ($4.16 million) of cover for one journey through this piracy hotspot. It says more are opting for cover to protect their employees to avoid lengthy detours that threaten supply chains and increase fuel costs.
Shipping Australia CEO Llew Russell told insuranceNEWS.com.au there are many local implications, with 20,000 Australian ships navigating these trade routes each year.
The Australian bulk carrier Stella Maris, for example, which was carrying lead and zinc, was hijacked off Somalia last July. $US2 million ($2.77 million) ransom was paid in late September to release the ship and crew.
Mr Russell says piracy and high insurance premiums will encourage shipping lines to take the southern route around the Cape of Good Hope, which increases fuel costs and takes 10 to 12 days longer. But it avoids other costs, such as the requirement to pay crews double while in the areas around Somalia.
“It’s vital that piracy is brought under control, and not only in relation to Somalia,” he said. “You can see there’ll be flow-on effects to other countries, particularly during the economic downturn.
“We may see an upsurge in this type of piracy elsewhere, which will have an even greater impact on world trade.”
Mr Russell suggests developed countries needs to build up aid to northern Somalia and the United Nations needs to send a force in to stabilise the situation.
“That in itself creates instability and is a very serious step to take, but I’m not sure there’s much alternative if we want to bring this under control,” he said. “It’s potentially serious for insurance. It may come to the point where it will be impossible to insure.”
In the past three weeks there have been 12 hijackings of ships off the coast of Somalia and along the busy Indian Ocean shipping lanes.
Aon says shipowners are paying $US30,000 ($41,500) in premium for $US3 million ($4.16 million) of cover for one journey through this piracy hotspot. It says more are opting for cover to protect their employees to avoid lengthy detours that threaten supply chains and increase fuel costs.
Shipping Australia CEO Llew Russell told insuranceNEWS.com.au there are many local implications, with 20,000 Australian ships navigating these trade routes each year.
The Australian bulk carrier Stella Maris, for example, which was carrying lead and zinc, was hijacked off Somalia last July. $US2 million ($2.77 million) ransom was paid in late September to release the ship and crew.
Mr Russell says piracy and high insurance premiums will encourage shipping lines to take the southern route around the Cape of Good Hope, which increases fuel costs and takes 10 to 12 days longer. But it avoids other costs, such as the requirement to pay crews double while in the areas around Somalia.
“It’s vital that piracy is brought under control, and not only in relation to Somalia,” he said. “You can see there’ll be flow-on effects to other countries, particularly during the economic downturn.
“We may see an upsurge in this type of piracy elsewhere, which will have an even greater impact on world trade.”
Mr Russell suggests developed countries needs to build up aid to northern Somalia and the United Nations needs to send a force in to stabilise the situation.
“That in itself creates instability and is a very serious step to take, but I’m not sure there’s much alternative if we want to bring this under control,” he said. “It’s potentially serious for insurance. It may come to the point where it will be impossible to insure.”