Kidnapping insurer sees upsurge in interest by shipping companies

Kidnapping insurer sees upsurge in interest by shipping companies A specialty insurer said it is seeing growing interest by shipping companies in a product that offers to insure their ships and crews against kidnap and ransom, because of the explosion in piracy incidents in the Gulf of Aden.
   Robert Davis, an underwriter at Hiscox, a Bermuda-based company that has offices in the United Kingdom, said his company has long insured executives from large companies against kidnapping, and developed a product for the shipping industry as well.
   But it wasn’t until about three months ago that his company saw an upsurge of interest by shipping companies as ship seizures off the coast of Somalia by pirates have climbed. He also said companies are increasingly concerned about piracy in Nigeria.
   He estimates his company has sold protection to less than 1 percent of shipping companies — “we are talking hundreds instead of thousands of ships.”
   The increased in interest in kidnapping cover has come even as the price has jumped 10-fold. He said the cost of covering a ship’s crew is roughly $9,000 as it passes through the Gulf of Aden compared to $900 a year ago.
   Prices would be adjusted according to how large a company’s fleet was, whether it makes frequent passage through the Gulf of Aden, and whether it stays far off the Somalia Coast. His company prefers to underwrite an owner's entire fleet, but will also offer coverage for a single ship or voyage.
   He noted all sorts of ships seem vulnerable to attack, with pirates seizing or attempting to attack everything from megayachts to giant gas carriers.
   Carriers who buy kidnapping and ransom coverage get three things for their money, he says.
   ' Reimbursement of ransom, up to $3 million.
   ' Access to specialty security consultants, who also negotiate with hijackers.
   ' Specialists who can “get the ransom to the bad guys” who often are located in hostile areas.
   Davis said at least one other company offers similar coverage, the Lloyds office of St. Paul Travelers.
   The U.K. Protection and Indemnity club noted that it “provides cover to its ship operating members for P&I legal liabilities arising out of piracy, but it is becoming increasingly difficult to distinguish what, in insurance terms, amounts to piracy. Some so-called acts of piracy may be more akin to acts of terrorism and therefore be excluded from P&I cover and fall within the scope of War Risks cover.”
   It suggested that ship operators check with their brokers to confirm that they have in place comprehensive War Risks cover to ensure that both their own property and their potential liabilities are appropriately covered in the case of attack.
   “Generally speaking, P&I claims arising from piracy attacks are rare, and, at least in the U.K. P&I Club’s case, so rare that it does not have the volume of data to produce meaningful statistics on piracy hot spots, the type of ships most at risk, etc.,” it said. ' Chris Dupin