How are Marine Piracy situations affecting insurance
When talking about Marine Piracy Insurance the unanswered question is “how are these numerous hostage situations affecting world insurance”? Despite the hundreds of articles regarding piracy problems and the insurers having to pay out ransom money, we have never worried about it as we failed to see how it would impact insurance buyers.
In 2008 there was a 300% increase in attempted or actual attacks on shipping in the Gulf of Aden and off the coast of Somalia, with no less than 17 ships and around 300 crew members being held to ransom.
Incidents of maritime piracy across the globe in 2014 have decreased according to Rick Gladstone, of the New York Times. Yet a spate of attacks off the West African coast centered around the Gulf of Guinea.
The year 2013 marked a significant drop in international piracy due to the falloff in Somali-related attacks on Africa’s east coast, but the slack has been taken up on the other side of the continent.
Nigerian Marine piracy makes up the majority of attacks on vessels in West Africa. The Nigerian navy estimates that up to 200,000 barrels of crude oil, valued at around $200 billion annually, are lost daily to thieves and pirates.
The most direct way to offset losses is for the insurers to raise premiums in the shipping sector. This in fact appears to be what is happening. According to a report in The Times in 2008, shipping premiums had risen more than tenfold as a result of piracy. Although recently piracy was decreased, premiums in the sector continue to increase and this looks unlikely to change due to the ongoing risks.
The problem for the average person though, is companies shipping goods in turn pass on costs to consumers. This means that piracy in Southeast Asia or Africa lead to higher food or petrol costs worldwide. In a period of generally rising prices, this is also easier to do, since the price rise would be “hidden” within general inflation.