Somali piracy a boost for London's shipping insurers
As the frequency of attacks rises, so, too, does cost of coverage for vessels plying pirate-infested waters.
London's shipping insurers are emerging as big winners from the surge in piracy across the Gulf of Aden. As the frequency of attacks rises, so, too, does coverage of vessels plying pirate-infested waters.
London has been home to the world's marine underwriting market since 1688 – when Edward Lloyd's coffee shop became the meeting place to sell coverage for slave ships. And it is theLloyd's of London syndicates that make money insuring ships routed through the Gulf. (US insurers do not cover piracy. Figures released last month by marine broker Aon reveal the surcharge for separate kidnap and ransom coverage could mean a shipowner pays an extra $30,000 per journey – for every $3 million worth of coverage – through high-risk seas – 10 times that charged last year.
Insurance firms are sensitive to suggestions that they benefit from the actions of pirates wielding rocket-propelled grenades, more so when their shipowning clients are wheezing from the impact of recession. But with 22,000 Gulf transits a year, additional premiums could be worth up to $400 million, says J. Peter Pham, a piracy expert at James Madison University in Harrisburg, Va.
"We've seen inquiries for [coverage] escalate as shipowners seek to protect their employees and businesses," explains Ashley Leszczuk from Aon's crisis-management team. "The cost of insurance is simply rising in correlation with the risk of kidnap in piracy hot spots."