Is insurance the right solution to piracy?
Posted on | December 15, 2009 | 2 Comments
THE shipping industry, as we know, likes a challenge. From the first owner who reckoned he could make another buck carrying more of something more quickly than had been possible before, to the one who thought that carrying ore in one direction and oil in the other was a sure-fire winner, it’s an industry of entrepreneurs.
Equally, give the industry a problem and sooner or later, it solves it. Occasionally, this DIY ethos extends into areas where there really should have been proactive strategies. Because these strategies – and the political vision that accompanies them – are so often lacking, what springs up is a cabal of suppliers and snake oil vendors all too ready to sell packing tape and glue.
This is most recently a problem concerning piracy. Though the industry might not have foreseen the upsurge in the Red Sea, its laggardly interest in finding a long term solution has created a vacuum into which first naval forces, then privateers and now the insurance industry is rushing.
American comedian Woody Allen told a joke about a woman whose mania for cover in all departments extended to her husband’s non-performance in the bedroom, though few people bother trying to assign humour to this most doomy of the dark arts of money.
The problem– as ICS chairman Spyros Polemis pointed out to the opening of the IMO Assembly – is that Gulf of Aden piracy is becoming a business as usual scenario. The extension of insurance from kidnap and ransom to cover for taking private armed guards, rather confirms the suspicion that the industry is out of ideas and options.
While we might agree that some insurance is sensible, insurance against the risk of negative consequences from action by private maritime security teams sends some very unfortunate messages. The first is that, as Mr Polemis suggested, the piracy problem is not going away anytime soon. The second is that owners are prepared to pay for the cost of the armed guards and the insurance rather than contribute money towards some kind of lasting solution.
This puts shipowners on a course for the sea area marked ‘moral hazard’ carrying cargo and seafarers as well as their insurance certificates. Let us hope their willingness to buy a work-around to a problem, does not indicate indifference to its causes or to their consequences.
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2 Responses to “Is insurance the right solution to piracy?”
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December 16th, 2009 @ 8:01 pm
One of my favorite Woody Allen movies from back in the day was called “BANANAS”, dealing with a failed state, rather than insurance.
Failed states are not solvable, in my opinion, so that it is wrong to look ashore for solutions to the piracy problem. Armed guards may be a temporary solution, with owners paying bilaterally, rather than through an industry wide system. I have advocated that industry associations should organize the convoys (yes, convoys) and also organize the armed guards- perhaps providing standards in the process. I would not count on governments “helping” shipping; quite the opposite. The help must come from the inside and though armed guards are troublesome, they are a good step towards a more permanent industry driven AND FUNDED solution.
January 4th, 2010 @ 4:07 pm
I am very interested in Flag of registry of the
pirated vessels. How many RUSSIAN or ISRAEL
flag ships have been successfully boarded by
Somali pirates ?So far I believe the answer is
ZERO.I am a VP with IFSMA and so far in all our
discussions at AGM meets in the past few years it appears almost all nationalities are willing to
pay the ransom, but not fight off the pirates.
Will this change, we will see.It appears that
PIRACY is a growth business.
Also,, what is happening to the Somali
Pirate brought back to NY after the
Alabama Maersk pirate incident. Will he end
up as a USA citizen after goiig in front of
some LIBERAL US JUDGE in the USA???After all
I am sure he must have had a DEPRIVED
childhood in Somali.Look forward to your
views.