Feral Jundi

Sean Woollerson, a senior partner with JLT, told The Independent: “We are looking at setting up a private navy to escort vessels through the danger zones. We would have armed personnel with fast boats escorting ships and make it very clear to any Somali vessels in the vicinity that they are entering a protected area.

“At the moment there is a disconnect between the private security sector and the international naval force. We think we can help remedy that and place this force under the control of the multi-national force. We look after about 5,000 ships and have had 10 vessels taken in total, including a seizure where one crew member was shot and killed. Piracy is a serious problem, these are criminals basically extorting funds, so why not do something more proactive?” 

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Jardine Lloyd Thompson Group (JLT), which insures 14 per cent of the world’s commercial shipping fleet, said the unprecedented “private navy” would work under the direct control of the military with clear rules of engagement valid under international law. Early discussions have also been held with the Ministry of Defence, the Department of Transport and the Foreign Office. 

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     I posted an article back in April that hinted at this private navy concept, and I had no idea that it would get to this level.  This is fantastic news and I totally support such a thing.  Mr. Woollerson is right and companies must do something more proactive.

    Now on to the control mechanism for this force. Perhaps now would be a time for Britain to re-evaluate their position on the Letter of Marque and Reprisal?  The Declaration of Paris might have been a nice concept at the time of ratification, but it removed a tool of the British government for dealing with non-state actors like pirates? They could actually license this private navy to do what it is doing.

     Within the terms of the license, that is where they can define who the companies answer too and what legal mechanisms they are to abide by. They can also put fail safe measures on this private navy, like an expiration date or something similar. Because if this private navy ‘would work under the direct control of the military with clear rules of engagement valid under international law’, then you guys might as well go all the way and issue the LoM?

    Another thing that I was thinking about here is that if JLT is successful with this insurance/private navy model, then will other insurance companies get the hint and be ‘proactive’ as well?  I guess time will tell and if the action does equate to a cost savings and safer voyages for the shipping industry, I am sure it will catch on.

    Finally, there is the cost factor.  It is extremely costly for the navies of the world to continue these anti-piracy operations using these large vessels/expensive air assets to go after pirates armed with AK’s in little motor boats. How is this sustainable economically? Eventually, the work load would have to be shared in order for it to continue, and perhaps private industry is looking into the future here. They are also looking at the fact that boats are still being taken, and all these fancy high tech navies are not able to stop these pirates. Nor is there anything being done on land, and the profitable piracy industry has no where to go but up.  Being proactive makes sense given the current state of things.

    Interesting stuff and I would like to know what company JLT will go through for raising this private navy?  If any readers, or even JLT can answer that one, that would be very cool. Hell, I will even post the recruitment ad for this ‘private navy’, and I will guarantee that JLT’s contractor will get a huge response. –Matt

Edit: 10/01/2010 -Be sure to check this show out in regards to the story. They discuss how the LoM could be used as a legal mechanism for this private navy.

Insurance firms plan private navy to take on Somali pirates

Somali Pirate Attacks Sink Premiums as Insurers Leap Aboard

Jardine Lloyd Thompson Group Plc

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Insurance firms plan private navy to take on Somali pirates

By Cahal Milmo

September 28, 2010

Patrol boats crewed by armed guards to protect valuable ships in Gulf of Aden

Insurers have drawn up plans for the world’s first private navy to try to turn the tide against Somali pirates who continue to plague the global shipping industry by hijacking vessels for ransoms of more than £100m a year, The Independent has learnt.

The new navy, which has the agreement in principle of several shipping groups and is being considered by the British Government, is the latest attempt to counter the increasingly sophisticated and aggressive piracy gangs who operate up to 1,200 miles from their bases in the Horn of Africa and are about to launch a new wave of seaborne attacks following the monsoon season.

A multi-national naval force, including an EU fleet currently commanded by a British officer, has dramatically reduced the number of assaults in the Gulf of Aden in recent months. But seizures continue with 16 ships and 354 sailors currently being held hostage. The Independent has seen Nato documents which show both ransom payments and the period that pirates are holding vessels have doubled in the last 12 months to an average $4m and 117 days respectively.

In response, a leading London insurer is pushing ahead with radical proposals to create a private fleet of about 20 patrol boats crewed by armed guards to bolster the international military presence off the Somali coast. They would act as escorts and fast-response vessels for shipping passing through the Suez Canal and the Indian Ocean.

Jardine Lloyd Thompson Group (JLT), which insures 14 per cent of the world’s commercial shipping fleet, said the unprecedented “private navy” would work under the direct control of the military with clear rules of engagement valid under international law. Early discussions have also been held with the Ministry of Defence, the Department of Transport and the Foreign Office.

The revelation comes as a coalition of shipping organisations and seafarers’ unions today call for governments to dedicate greater resources towards tackling piracy off Somalia.

Sean Woollerson, a senior partner with JLT, told The Independent: “We are looking at setting up a private navy to escort vessels through the danger zones. We would have armed personnel with fast boats escorting ships and make it very clear to any Somali vessels in the vicinity that they are entering a protected area.

“At the moment there is a disconnect between the private security sector and the international naval force. We think we can help remedy that and place this force under the control of the multi-national force. We look after about 5,000 ships and have had 10 vessels taken in total, including a seizure where one crew member was shot and killed. Piracy is a serious problem, these are criminals basically extorting funds, so why not do something more proactive?”

The force, which would have set-up costs of around £10m, would be funded by insurers and shipping companies in return for a reduction on the anti-piracy insurance premiums, which average around £50,000 per voyage and can reach £300,000 for a super-tanker. The maritime insurance industry, much of it based in London, has borne the brunt of the financial cost of the piracy problem, paying out $300m (£191m) in ransoms and associated costs in the last two years alone.

Major obstacles remain before the private navy can set sail, such as the legal status of a private force and it relationship with the Nato-controlled naval fleet. But major shipping companies and key insurers are keen to proceed with the plan. Although private contractors already offer armed teams on board vessels, the idea of a sizeable industry-funded naval force is a major departure and evidence of the strength of feeling there that more needs to be done to counter piracy.

A source at one major shipping organisation said the proposal was “viable”, although it was vital it did not lead to a down-scaling of the international military force.

A FCO spokesman said it had not yet received a “formal” proposal but added: “We believe that such a concept could be considered. It would need to be endorsed and supported by the UK in close discussion with coalition partners in current counter piracy operations.”

The prospect of the private sector directly intervening to protect the 6.8 billion tons of goods moved by sea each year is symptomatic of renewed alarm at the success of about 1,000 pirates controlled by Somali clans in disrupting the 22,000 ships which pass through the Gulf of Aden annually.

Using light fishing skiffs and armed with AK-47s, rocket-propelled grenades and ladders, the raiders attack hundreds of vessels a year, forcing seized crews to sail to the Somali coastline where they are held hostage until the ship owner agrees to pay a ransom. The problem peaked last year with 217 attacks and 47 ship seizures but despite the success of naval patrols in deterring raiders in the Gulf of Aden, the hijackings continue there and in the Indian Ocean, an area so vast that naval commanders admit it cannot be effectively policed. So far in 2010, there have been 123 attacks and 33 seizures.

As a result, shipping companies are contemplating the increased use of armed contractors on board their vessels, something previously considered more likely to escalate encounters with pirates.

MSC, the world’s second largest container shipping company, announced this week that it will decide “within days” whether to arm its vessels. Pasquale Ferrero, assistant operations manager, said: “We do not have armed guards at the moment but we are considering their use to protect our crew, the ship and the cargo.”

A coalition of shipping companies, trade unions and welfare organisations yesterday sought to increase the pressure on governments and international bodies to provide more military cover and secure an agreement which allows pirates to be captured and prosecuted. Currently nearly all suspected pirates captured off the Somali coast are simply stripped of their weapons and allowed to return to port.

Spyros Polemis, president of the International Shipping Federation, said: “We need a new strategy and additional military resources. Governments must really wake up to the enormity of the problem, as the number of pirates continues to increase in the knowledge they can act with virtual impunity. The international community can no longer afford to sit on its hands and cede control of its vital seaways to criminals.”

Story here.

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Somali Pirate Attacks Sink Premiums as Insurers Leap Aboard

By Carolyn Bandel and Kevin Crowley

Aug 2, 2010

Kidnap and ransom premiums paid to insure against Somali piracy have slumped since the BBC Trinidad was hijacked in the Gulf of Aden in August 2008 as escalating attacks spurred more companies to offer coverage.

Buying $5 million of coverage now costs as little as $15,000 per voyage, half the peak rate in 2008, said William Miller, divisional director of Willis Group Holding Plc’s Kidnap and Ransom, or K&R, unit in London.

“Piracy is a peak risk with a relatively low probability of happening, but with an immensely high damage potential,” said Niels Stolberg, head of Bremen, Germany-based Beluga Shipping GmbH, the Trinidad’s owner. The company now buys kidnap and ransom coverage for every ship crossing “this dangerous passage,” after paying a $1.1 million ransom to release the vessel and its 13 crew from the pirate haven of Eyl, he said.

Kidnap and ransom premiums climbed to $100 million last year as pirate attacks on the 25,000 ships passing through the Gulf of Aden rose 70 percent. That prompted more insurers, including Aspen Insurance Holdings Ltd., Ascot Underwriting Ltd. and Chubb Corp., to offer marine K&R coverage, a policy first developed to address kidnapping in South America.

The insurance covers the ransom of the ship and its crew, including negotiations with pirates and hiring ex-special forces teams to deliver the money. With Somali pirates usually returning hijacked vessels undamaged, kidnap and ransom plugs a gap in war-risk insurance that only covers damage to a ship and its cargo, said Stolberg.

Ransoms Increase

The average ransom has almost doubled to between $3.5 million and $4 million since Chubb entered the market 22 months ago, said K&R Manager Greg Bangs, adding that the company expects to expand its piracy business further.

“At first the rates were a little higher than they should have been and then over time insurers realized they could reduce their rates and still make money,” said Bangs.

The decline in rates has deterred Ascot from writing any policies since being authorized to offer kidnap and ransom coverage last November, said Andrew Moulton, a marine underwriter at the Lloyd’s of London arm of American International Group Inc.

“Traditional carriers have been cutting each other so much to get the premium in that the price has fallen off the end of a cliff,” said Moulton, adding that in the current economic climate, most ship owners won’t buy kidnap and ransom insurance as they view it as “icing on the cake” rather than core coverage.

‘Big Problem’

Pirates are currently holding 18 ships and 379 hostages, up from 11 ships and 261 hostages at the beginning of the year, according to the International Maritime Bureau. When the summer monsoon in the Indian Ocean ends this month, attacks may rise as pirates venture from lairs such as Garacad, Hobyo and Harardhere on the Somali coast, said bureau Director Pottengal Mukundan.

“It’s a big problem,” said Per Gullestrup, chief executive officer of Clipper Ferries. He arranged for a $1.7 million cash ransom to be parachuted to pirates that used AK-47s and rocket-propelled grenades to hijack the CEC Future in November 2008. “The Somali pirates have shown they are quite good at adapting to the situation.”

Pirates are being encouraged by the ransoms and the ease with which they capture ships, said Sven Gerhard, global product leader of marine hull & liabilities at Allianz SE’s corporate and specialty unit. Ship owners must also pay as much as $2.5 million to negotiators and security firms that fly the ransom to a drop-off point, he said.

‘Taking More Risks’

While the presence of the Combined Maritime Forces in the Gulf of Aden cut attacks by 18 percent to 196 in the first half of this year, incidents in the surrounding Somali basin and Indian Ocean rose 14 percent to 51 as the pirates used larger mother ships to widen their range toward the Maldives and as far south as the Mozambique Channel, according to the maritime bureau.

Attacks have been reported as far as 1,000 miles from shore.

“They’re going further and they’re taking more risks than before,” said Guillaume Bonnissent at Hiscox Ltd. in London, the world’s largest underwriter for piracy coverage.

Premiums depend on the ship’s speed, height of its deck above sea level and measures taken to protect the vessel, said Sean Woollerson, a partner at Jardine Lloyd Thompson Group Plc, the U.K.’s biggest publicly traded insurance broker.

While most insurers advise ship owners to deploy razor wire and train sailors how to legally fend off attacks, Woollerson also aims to raise funds for a fleet of escort ships to shepherd vessels through the Gulf of Aden. That may push rates down further, he said.

‘Private Navy’

“We are working on a unique concept to create a legitimate private navy for the shipping industry to complement the existing naval forces to stop this kind of piracy escalating,” said Woollerson, who estimates start-up costs of $15 million. “This is the only way we’re ever going to stem these attacks.”

For the moment, Beluga Shipping deploys high-pressure hoses and cardboard dummies called “soldiers” to deter boarders, after the Trinidad was captured by nine pirates using two speedboats, said Stolberg.

“Sending armed teams aboard is a last resort,” said Mark Hankey, a spokesman for Maritime & Underwater Security Consultants, which gives shipping lines transit advice from its basement control center opposite London’s Royal Courts of Justice. Using arms involves the risk of “massive escalation,” he said.

When the company does employ guards on cargo vessels it stations three to four former British Royal Marines or Royal Navy personnel to escort ships through pirate waters, said Hankey.

No Guarantees

The naval task force is no longer effective after the pirates expanded the scope of their operations, said Jan-Thiess Heitmann, head of the legal department at the German Ship Owners’ Association. While the association is against arming crew members or hiring armed security guards, it’s in talks with the German government on installing soldiers on merchant ships.

“The number of forces is never going to be enough to guarantee protection,” a spokesman for the 24-nation Combined Maritime Forces said in an e-mailed statement. “Pirates are opportunists who will seek the easiest target available.”

The naval force deploys as many as 25 vessels in counter- piracy operations along a recommended transit corridor that runs from close to the Bab-el-Mandeb at the southern end of the Red Sea through the Gulf of Aden to a point north of the Yemeni island of Socotra. The corridor carries about a fifth of the world’s trade.

Gullestrup says a set of best practices, introduced by the naval task force, have helped keep the rest of Clipper’s fleet safe. Still, he says the only long-term solution to piracy is to help Somalia, a country that has lacked a central government since the overthrow of former dictator Mohamed Siad Barre in 1991, develop its own security and coastguard infrastructure.

“All the money would be much better spent in assisting the Somalis in capacity building,” he said.

Story here.