Somali piracy has taken an alarming turn in the first quarter of 2011 becoming significantly more prevalent, lucrative and violent as pirates adopt new tactics according to Special Contingency Risks Limited (SCR) and Maritime & Underwater Security Consultants (MUSC).
At a seminar held at the Willis Building last Friday, MUSC, a leading maritime security adviser, told delegates that an estimated $65 million has been paid in ransoms to pirate gangs in the first quarter of this year. This is in comparison to the same period in 2009 when approximately $39 million in ransoms were paid.
According to MUSC, at least 18 commercial vessels (10 of which were hijacked this year) and around 500 hostages are currently being held by Somali pirates. At the end of April, the International Maritime Bureau reported that the number of ships being held was 26, but MUSC explained that the unprecedented drop-off in recent weeks was due to the fact that pirates were forced to release several ships in quick succession for lower than average ransoms.
The maritime consultancy said that this appeared to be as a result of the success of pirate gangs leading to anchorages becoming full and the glut of hijacked vessels over-stretching their resources and credit lines. MUSC however anticipates that once pirates have received sufficient levels of hard currency from such “firesales” their operations will begin again in earnest.
At the event, speakers from SCR, the market leader in kidnap and ransom insurance, and MUSC said that the continued first quarter growth in hijackings appears to be attributable to evolving tactics of the pirates who have expanded the volume and range of their operations in the Arabian Sea and the Indian Ocean. The three new dynamics that have changed the nature of Somali piracy include:
Mother ships: Commercial vessels are being actively used by pirates as floating bases to launch attack skiffs, to resupply pirate attack groups and to conduct hijackings. This has greatly increased the range in which pirates are able to operate and reduced their dependence on favourable weather conditions.
Personnel: The success of the pirates has attracted a new, more aggressive generation of practitioners from criminal gangs and even neighbouring countries in the Horn of Africa. This has led to an increase in violence towards seafarers with hostages being executed in 2011 for the first time. Five seafarers have been killed so far this year and returning hostages are reporting stories of torture and increasing maltreatment.
Increased ransoms and hijacking periods: While extremely difficult to ascertain, the average ransom has reportedly increased from $2.1 million in the first quarter of 2009 to $4.6 million in the first quarter of 2011. Simultaneously, the periods that hijacked ships are being held for is now roughly six months on average, up from 2009’s average of two to three months.
Speaking about the changes in pirates’ strategy and tactics, Tim Hart an Analyst at MUSC, said, “Pirates are proving to be remarkably resistant to new tactics being employed by shipowners and navies, and are themselves engaging in a form of tactical Darwinism to evolve and adapt to new challenges.
As the global security situation diverts already stretched naval forces from counter piracy operations, the onus falls on shipowners to do everything they can to train their crews to prevent attacks.”
To ensure effective training and prevention, speakers at the event discussed an innovative insurance solution called Vessel Shield™, a marine piracy product that SCR and MUSC launched in March 2009. William Miller, Divisional Director, SCR, said, “We are able to say that no ship with Vessel Shield™ cover has been taken by pirates and we believe this to be a strong indication that the preparation, training and advice offered as part of the comprehensive package of services comprised within the product has successfully mitigated the piracy risk for our clients to date.”
Vessel Shield™ helps ships’ masters navigate dangerous waters by keeping them in constant contact with MUSC’s maritime security experts. These analysts feed masters with real time information from other vessels and navy patrols, notifying them of any suspicious-looking vessels and attempted attacks in the vicinity. The product also provides pre-transit security advice and anti-piracy drills for the crew, and in the event of an attack, co-ordinated crisis management support, negotiation services, ransom payment logistics and vessel and crew recovery.
Commenting on the insurance implications of the changing nature of Somali piracy, Miller said, “It’s imperative to world trade that these shipping lanes remain open and active. Insurers are responding by continuing to offer plenty of capacity at relatively consistent rates to shipowners, and by encouraging better risk management practices by mandating them in policies.
“In 2009 when we launched Vessel Shield™, freeboard and vessel speeds were the basic underwriting criteria, with shipowners still able to get discounts if their vessels were protected with razor wire. Today razor wire is a basic requirement for the market, with underwriters stipulating that the maritime industry’s Best Management Practices (BMP3) are followed as a pre-requisite to obtain cover,” said Miller.
MUSC is a leading international maritime consultancy providing risk management services across international borders and in respect of all aspects of transport and supply chains. MUSC also has an unrivalled first-hand reputation in anti-piracy operations and intelligence. For more information on MUSC and their services visit www.mandusc.com.
SCR is an insurance broker and risk management consultancy which started trading in 1976 and is the global market leader in kidnap and ransom coverage. It is a subsidiary of Willis Group Holdings plc and is one of the independent companies under the Faber & Dumas umbrella. Faber & Dumas provides specialist wholesale services in a number of areas including property, accident & health; fine art, jewellery and specie; kidnap and ransom, bloodstock; energy; construction; cargo and casualty lines. For more information visit www.scr-ltd.co.uk.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part of the world. Additional information on Willis may be found at www.willis.com.