‘Piracy’ insurance becoming increasingly critical

Piracy off the east coast of Africa has not affected South Africa as negatively as other countries, according to global insurance broker Aon. Shivien Pillay, Aon South Africa business unit head: marine, says as pirates have mostly been interested in obtaining ransom money from ship owners for hijacked vessels, South Africa has escaped any major impact. “Generally the pirates are not after the cargo,” says Pillay. “Clients have, however, been plagued with delays in obtaining their goods. In most cases they only purchase cover in respect of physical loss or damage to the goods insured. Losses as a result of delay are not covered and these can impact negatively on a client’s market relations and reputation.” Recently the Kenyan newspaper Business Daily reported that imported goods into East Africa could cost more if the UN declared the Western India Ocean region a war-risk zone in response to piracy attacks. At least 40 vessels have been affected in the past two months alone. More and more vessel owners are now considering taking out kidnap and ransom insurance as ransom payments and the total expense of releasing a vessel from pirates can leave ship owners facing substantial expenses. But, due to the piracy threat – especially around the Gulf of Aden – ransom insurance is now estimated to be ten times higher than it was two years ago. Aon, which in 2008 launched an insurance policy for charterers, shipowners and cargo owners to cover loss of earnings from a ship being detained by pirates, believes it is imperative for goods travelling in the Horn of Africa region to be insured for piracy. With the average duration of vessel seizure around 60 days, cargo owners are advised to consider this insurance option as delays remain costly and pose their own risk such as contracts being cancelled.