Business Insurance: Piracy – Part One

Though it may strike you that piracy is a crime relegated to history; it continues to be a current problem that is growing on a global scale. Increasingly, rightful property owners are being deprived of both their property and the opportunity to profit from their work. The loss caused by modern piracy is growing in frequency and severity.

Ocean marine coverage is concerned with protecting businesses involved in transporting persons and cargo over the world’s oceans. The protection is divided into several major categories such as the risk of loss or destruction of vessels, loss or destruction of cargo and liability for injury to passengers and to property that belongs to those passengers and, especially to other parties (such as another object that an insured ship may strike). Piracy is another source of loss that is handled by this coverage.

Piracy Defined

Essentially, maritime piracy refers to acts involving at least two vessels, a pirate and a victim vessel. Pirate acts are those which are violent, including detention, and that are perpetrated by private individuals, against other private parties. Therefore, acts involving military personnel or those which are fueled by political motives do not qualify as piracy. Since piracy involves at least two vessels, it is distinct from hijackings where onboard individuals unlawfully wrest control of a vessel from another party.

The scale of piracy is quite broad, ranging from simple acts of passengers being robbed of cash and other valuables, up to an entire vessel being stolen and used for further criminal activity. While minor acts do not affect a vessel’s crew or passengers; major acts may involve rightful vessel occupants being set adrift or, much worse, being killed in order to gain possession of the ship. Major incidents of piracy around the world create losses in the hundreds of millions of dollars.

Piracy Hot Spots

Acts of piracy are much more prevalent in certain parts of the world where lack of enforcement and low incident reporting creates a favorable environment. In recent years, the choke point of the Suez Canal and the waters of Southeast Asia have been extremely problematic. Piracy is becoming more popular because of the relatively low risk of capture and the high rewards associated with successful operations. Personal luxury items (particularly watches and jewelry) and cargos are, by their nature, fairly easily disposed of as markets are plentiful for such goods.

According to some statistics, cargo vessels, fishing vessels and tankers are the most popular targets. Further, the majority of pirate incidents are completed quite rapidly as, increasingly; pirates have favored working in small crews, using high-powered speedboats.

Please see part two regarding the financial impact and other considerations of this loss exposure.


Original Article