Shipowners are paying $120 million a year to London insurers to protect vessels against the risk of attack by Somali pirates, the Lloyd’s Market Association said.
Insurers paid out “significantly” more to owners whose vessels were seized than they received in premiums, Andrew Voke, chairman of the association’s marine committee, said today at a Commons Select Committee hearing in London. Munich Re, the world’s biggest reinsurer, and other association members provide 70 percent of all war-risk insurance.
About 28,000 vessels a year transit the region affected by Somali pirates, said Mark Brownrigg, director general of the UK’s Chamber of Shipping. Rerouting to avoid pirates would cost a large container ship between $185,000 and $300,000, he estimated. Additional insurance costs for each transit are between $30,000 and $60,000, according to the association.
Naval forces deployed to counter piracy caught and released at least 1,500 Somali pirates, out of the estimated total number of 3,500 operating, over the last three years, Stephen Askins, a London-based marine lawyer at Ince & Co., said at the hearing.
No money has been recovered from ransoms paid, according to Askins. The former Royal Marine said he advises shipowners, deals with ransom negotiators and interviews crew members upon release from hijacked vessels.
Dubai, Nairobi
“I would see what more could be done to trace the money,” Askins said. Investigations should focus on Dubai and Nairobi, where some money was diverted, he said.
Insurers paid an estimated 130 ransoms in the last three years, Neil Roberts, senior executive for underwriting at the association, said in a June 17 interview.
Between five and eight warships are in the Indian Ocean and a similar number are in the Gulf of Aden, said Major General Buster Howes, operation commander European Union Naval Force Somalia. As many as 83 frigates and destroyers equipped with helicopters would be needed to provide a 30-minute response time to protect vessels from pirates operating in an area of water larger than Europe, he said. “Are we able to effectively police the entire area? No, we’re not,” Howes said.
Source: Bloomberg
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