On March 10, an Insurance executive in Korea told nearly 100 ship owners they are exposing their crews to risk as they struggle to pay escalating ransom demands.
Hijackings in the Gulf of Aden region is on the on the increase as Somali pirates increasingly target cargo ships.
This meeting came as pirates increasingly target cargo vessels in the Gulf of Aden.
Jonathan Doherty, North Asia regional manager for the Chubb Group of Insurance Companies, noted that each year an average of 500 Korean ships pass through the Gulf of Aden, currently one of the most dangerous regions for piracy.
In 2008, 111 ships, including Korean-owned or manned cargo vessels, were attacked by pirates in the Gulf of Aden, a 200% increase over 2007. Forty-two of those ships were held for ransom, and 889 crew members were taken hostage. Most ransom demands were between $1 million and $4 million per ship.
“Vessel owners may assume that their hull or cargo insurance policy will pay the exorbitant ransoms that pirates demand,” said Gregory Bangs, worldwide crime, kidnap and ransom manager for Chubb.
“Unfortunately, typical marine products do not fully contemplate and, therefore, may not fully respond to these types of piracy exposures. In addition, the hull policy often excludes ‘acts of terrorism,’ and courts still have not clearly defined whether pirates are terrorists. This can leave a crew that has been taken hostage at risk, while all parties—insurance companies, vessel owners and cargo owners—determine who will pay what for the ransom”, he added.
Usually kidnap ransom and extortion insurance, subject to policy limits together with terms and conditions, reimburses the policyholder for the pirate’s ransom and extortion demands and pays for hostage/ransom negotiation expenses.
Under the insurance policy, costs of legal defense, public relations, interest on loans taken out to cover ransom demands, security guards, travel and accommodations for insured persons, medical and psychiatric services, and rewards leading to the safe release of kidnap victims are also covered.
According to Bangs, it would take “a great deal of teamwork to stop piracy at sea.” He also said that many countries have joined efforts to battle against this.
Bangs advised boat owners to consider the best ways to help protect their crew and property from a piracy event, this includes the type of insurance protection they select.