Boat Safety Comments Off on Pirate Attacks Lead to Cheaper Insurance Coverage
Kidnap and ransom premiums paid to insure against Somali piracy have slumped since the BBC Trinidad was hijacked in the Gulf of Aden in August 2008 as escalating attacks spurred more companies to offer coverage.
Buying $5 million of coverage now costs as little as $15,000 per voyage, half the peak rate in 2008, William Miller, divisional director of Willis Group Holding Plc’s Kidnap and Ransom, or K&R, unit in London, told the Taiwan News.
“Piracy is a peak risk with a relatively low probability of happening, but with an immensely high damage potential,” said Niels Stolberg, head of Bremen, Germany-based Beluga Shipping GmbH, the Trinidad’s owner.
The company now buys kidnap-and-ransom coverage for every ship crossing “this dangerous passage” after paying a $1.1 million ransom to release the vessel and its 13 crew, he told the newspaper.
Kidnap and ransom premiums climbed to $100 million last year as pirate attacks on the 25,000 ships passing through the Gulf of Aden rose 70 percent. That prompted more insurers, including Aspen Insurance Holdings Ltd., Ascot Underwriting Ltd. and Chubb Corp., to offer marine K&R coverage, a policy first developed to address kidnapping in South America.
The insurance covers the ransom of the ship and its crew, including negotiations with pirates and hiring former special forces teams to deliver the money. With Somali pirates usually returning hijacked vessels undamaged, kidnap-and-ransom plugs a gap in war-risk insurance that only covers damage to a ship and its cargo, Stolberg said.
Patrick Farrell @ August 10, 2010