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Varada Bhat
Remya Nair

Mumbai, Nov. 9 Insurance costs of shipping lines have gone up considerably in the recent past as they have been forced to take ‘kidnap and ransom’ policy after the recent flare-up on pirate attacks on high seas, off the coast of Somalia.

What has pushed up the costs to such a large extent is the fact that kidnap and ransom policies come with a very high premium.

Typically, shipping companies purchase a $1-million insurance cover.

The insurance premium works out to $10,000-$15,000 per week.

The cover for kidnap and ransom is bought on a voyage-to-voyage basis, and not for a year like other policies.

The premiums are decided on a weekly basis as the situation can change every day, said Mr K. Ramachandran, Executive Director, J.B. Boda Insurance Brokers.

“Shipping companies are increasingly opting for an additional kidnap and ransom cover, besides taking the standard hull and machinery cover. It has become a necessity for the ships that pass through the Gulf of Aden, because of the increasing attacks from pirates,” said Mr Ramachandran.

An executive at the insurance department of Shipping Corporation of India said, traditional marine insurance does cover piracy, but does not provide adequate cover against hijack of ships.

“Along with traditional marine policy, now ship owners are opting for the specialised marine kidnap and ransom insurance policy which provides guarantee for reimbursement of the ransom, cost of delivery of ransom and legal costs that may occur during a period of illegal seizure,” he said.

“Marine insurance is specific to ship, voyage and climatic conditions. As the number of pirate attacks has increased in the Gulf of Aden, the reinsurance rates have gone up for this route. As a result, the marine insurance premiums have gone up by 20-25 per cent in the past one year,” said Mr Rahul Aggarwal, CEO, Optima Insurance Brokers.

Mr V. Ashok, Director, Essar Shipping Ports & Logistics, also confirmed that the costs of marine insurance had seen a sharp rise.

In the first nine months of 2009, Somalia’s pirates were responsible for over half the 306 attacks against ships worldwide, according to Director General of Shipping (DGS).

In last two weeks, the Panama-flagged bulk carrier MV Al Khaliq, carrying 24 Indian sailors and Singapore-flagged container vessel MV Kota Wajar with four Indians were hijacked near Seychelles.

Earlier last month, the DGS had ‘strongly’ advised Indian ships carrying Indian seafarers transiting the Gulf of Aden to utilise the escort provided by the naval ships.

The Ministry issued the advisory following media reports quoting a NATO (North Atlantic Treaty Organisation) official that there are specific threats to Indian ships and Indian seafarers by Al Qaeda type groups in the Gulf of Aden and on the Somalia coast.

More Stories on : General Insurance | Shipping/Ports | General Insurance

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