This is a first. I want to thank the insurance company Maritime and Underwater Security Consultants who sent me this excellent article, and here is a link to their website. Their intent was to promote that their company has the most extensive insurance plans for kidnap and ransom, and that other companies fall short in their coverage. If you are a shipping company owner or yacht owner and you are reading this right now, feel free to check these guys out–but still, buyer beware. This is not an FJ endorsement, but I will definitely provide a link for your research.
The real story here though, is that with all of this competition between insurance companies in providing K and R insurance driving down cost, as well as the increase in protective measures on the boats, premiums are dropping. Now of course Reuters and the authors won’t say it, but I think armed security contractors on the boats are what really give them a better rating. That, and all these navies floating around and hunting pirates have got to help as well. But what happens when these navies burn out, and their governments call them back because of the cost?
For one, if you read further down the report, there is already some buzz in the industry about starting up a private navy to help supplement today’s naval operations. I personally think this is a move to provide a back up plan, if a navy or two decides to bow out. Piracy is not going away anytime soon, and I wonder how long countries can keep up their deployments–both politically, and economically.
I also took interest in this Automated Voyage Risk Assessment system, designed to analyze a boat’s protective capabilities in dangerous waters. AVRA I hope is a complete assessment system, that includes lethal and non-lethal factors in protecting a boat. If this is one of those mechanisms developed by the Juicebox Commandoes I keep talking about, who continue to promote non-lethal as the only suitable protection for ships, then I have no respect for AVRA. –Matt
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Piracy premiums take a breather but menace remains
Thu Apr 1, 2010
By Myles Neligan and Lorraine Turner
LONDON (Reuters) – Stiff competition and moves by owners to protect ships better has taken the edge out of insurance costs after pirate attacks off Africa’s east coast created a two-year boom for specialist cover.
But analysts say the menace of piracy is far from contained, and unchecked growth in the rest of Africa, possible attacks in other key shipping channels and higher ransom demands will keep insurers interested in the long term.
While official estimates are not available, brokers reckon sales of so-called marine kidnap and ransom (K&R) insurance have soared to about $100 million (66 million pounds) a year since 2008, when the product was first developed in response to an upsurge of vessel seizures and ransom demands by Somali gangs.
But the cover now costs less than it did two years ago, reflecting mounting competitive pressure as more insurers enter the fast-growing market.
The marine K&R market is currently dominated by six players, led by Bermuda-based Hiscox (HSX.L) and Travelers (TRV.N) of the U.S., up from just three when the product first became available, and more are expected to join.
“There’s an increase in supply and the price is going down,” said Sean Woollerson of insurance broker Jardine Lloyd Thompson (JLT.L).