Pirate attacks off the coast of Somalia on the rise and could cause a significant increase in the price of shipped goods, according to a new report commissioned by Lloyd’s of London.
“(The) piracy risk is likely to get worse before it gets better,” the report said, echoing “serious concerns” over piracy voiced last month by the Group of Eight powers (G8).
“The cost of keeping global trade routes open could result in a growing ‘piracy tax’ that will be felt by a wider range of businesses and consumers, already battered by the effects of recession,” the Lloyd’s report said.
As insurance costs escalate with the pirate attacks, shipping companies are increasingly choosing longer sea routes to avoid the region.
“It’s quite difficult to find vessels that will go through the Gulf of Aden these days,” said a ship broker based in London.
Insurance premiums on vessels travelling through the pirate-ridden Gulf of Aden have increased to between 0.05% and 0.175% the value of their cargo, compared to between 0% and 0.05% in May 2008.
Industry experts believe rates could rise further still if pirate attacks are not curtailed.
“Rates and charges may well escalate if the number of successful piracy attacks increases,” said Paul Newton, marine underwriter at Allianz.
Sainsbury’s expressed concern that its deliveries could be delayed due to pirate attacks.
“Retailers are highly reliant on their increasingly global supply chains and any unrest or piracy could have an impact on this crucial process,” said Paul Howard, the supermarket’s head of insurance and risk management.
“Although none have been confirmed, there have been rumours of deviations in delivery because of piracy events, the Gulf of Aden being a crucial route for many retailers in the UK,” Howard added.
Source: InsuranceDaily.co.uk
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