Shipowners and operators are set to face higher insurance costs because of the increase in piracy off Somalia, insurers have warned.
Escalating piracy is prompting marine insurance specialists to step up advice to shipowners to improve security on their vessels. Shipowners are also making more use of “kidnap and ransom” insurance – normally used for corporate executives sent to danger zones – for their crews.
Attacks on ships off Somalia – most recently the Sirius Star, the biggest oil tanker seized by pirates to date – comes with the price of marine insurance rising because of large claims associated with hurricanes and disruption to the energy industry, Mr Berg said.
He said there was also reduced reinsurance capacity because of the global financial turmoil.
Although these would be the main drivers of “double digit” increases in the cost of marine reinsurance, an upswing in claims from pirate attacks was a contributing factor.
The price of protecting a ship or its cargo against piracy through insurance was rising, he said, and this would feed the reinsurance market.
Underwriters estimate that shipowners have paid about $20m in ransoms to pirates this year, substantially pushing up the cost of claims.
Lord Levene, chairman of Lloyd’s, said insurers did not want to pay ransoms but this appeared to be the only means of resolving incidents. “The real solution is to stop these people from operating. That is what we have to concentrate on,” he said, calling for more resources for naval forces.
Insurers said that while shipowners and operators faced the prospect of higher policy prices, there was no risk of cover against pirate attacks being withdrawn.
