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Thursday, July 09, 2009

Shipping insurance up 10-fold due to piracy

Thursday, 09 July 2009

Piracy at sea off the horn of Africa has caused a 10-fold increase in insurance premiums for shipping companies, business daily Borsen said on Wednesday citing a Norwegian ship insurer. Somali gangs have been marauding in the Gulf of Aden and Indian Ocean for years, seizing hundreds of ships and their crew to extract ransom, hitting a key route from Europe to Asia.
In the latest incident, pirates hijacked a Turkish vessel in the Gulf of Aden on Wednesday morning. "There has been a big increase in premiums to go through the Gulf of Aden," Svein Ringbakken, insurance director at Den Norske Krigsforsikring for Skib (DNK), told the paper.
In May 2008, premiums were 0.015 percent of a vessel's value, but now the average is 0.15 percent, Ringbakken said, according to Borsen.
An executive at a Norwegian unit of insurance brokers Marsh said insurance premiums vary, with a big player like Danish container shipping group A.P. Moller-Maersk getting "very competitive" prices due to its size, while smaller shippers pay a big premium, Borsen said.
Premiums can be even as high as 0.8 percent of a ship's value if the vessel sails in particularly dangerous waters such as the Straits of Malacca between Malaysia and Indonesia or off Nigeria, Marsh's Magne Andersen told the paper.
To avoid sailing through the treacherous Gulf of Aden, many shippers are choosing to avoid the Suez Canal and sail instead around Africa, adding some 5,000 sea miles to the journey.
Australian researcher Helen Bendall estimated the net extra costs for a supertanker to sail around the Cape of Good Hope in South Africa at around $7.2 million and for a container ship at about $3.8 million, Borsen said.

Source: Reuters