The Hindu Business Line : Ransom risk cover gets costlier

The spurt in piracy off Somalia has brought into focus how helpless shipowners and crew can be as some international sea trade lanes become dangerous. According to an IMB report, there are 11 ships with more than 200 crew members under detention in Somali waters. Earlier, the danger zone was Malacca Strait. However, piracy in the strait was curbed through military intervention by Malaysia, Singapore and Indonesia. In any such activity there will always be major problems of physical damage and loss of life at some point. But as pirates are getting greedier and taking greater risks, the ransoms they are asking are running too high. As reports suggest, of six vessels released by pirates some time ago, $20 million was demanded and about $10 million was paid. The ransom costs were picked up by hull underwriters, who were not in a position to ask for increased premiums or cancel coverage in a particular area. No wonder the insurance premiums are rising. According to Lloyd’s of London insurers, pirate ransoms risk have skyrocketed from $500,000 a year ago to $8 million today.

Citing the French example, some experts point out that the law of the sea convention could be a powerful tool against piracy but only for those who decide to apply its provisions extensively. Unfortunately, many countries have not ratified the convention.

OUR BUREAU

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