Lloyds: Piracy Coverage Remains Despite Danger, Cost


Insurance companies continue to provide piracy cover to ships traveling in the troubled Horn of Africa regions, but piracy remains a “significant problem,” a representative of the Lloyd’s Market Association told Congress.

Neil Smith, head of underwriting for the LMA, said that despite great danger and cost, the insurance industry as a whole has continued to provide piracy cover. However, insurers do not have the power or influence to fundamentally impact the threat of piracy by themselves, Smith added.

Smith made his comments at a hearing April 10 designed to update members of Congress on U.S. efforts to combat piracy. The hearing was held by the Subcommittee on Coast Guard and Maritime Transportation, a part of the House Transportation Committee.

David T. Matsuda, Maritime Administration administrator, an agency of the federal Department of Transportation, testified that piracy in the Horn of Africa region has declined since its peak in 2010.

“This is largely due to the coordinated and sustained response by governments and the maritime industry,” Matsuda said.

He cautioned that the problem of piracy ‚Äúis far from resolved,‚Äù and piracy continues to be a threat not only in the waters off Somalia but also in the Gulf of Guinea and in other regions of the world. “The good news regarding successes in reducing piracy in the Horn of Africa proves that the threat of piracy can be beaten; but not without continued vigilance,‚Äù Matsuda said.

In his testimony on behalf of Lloyd‚Äôs, Smith deflected criticism that the insurance industry is not doing enough to combat piracy. He said the “main focus of the insurance sector has been to work alongside the shipping community to attempt, as far as possible, to reduce the risks from piracy in those areas of the world where the threat is significant.”

“The marine insurance sector cannot do this in isolation,” he said, “as it operates in a fiercely competitive commercial environment, and in many cases is also impacted by various competition restrictions which prevent the sector from being as proscriptive as it might otherwise wish to be.

Smith said about 90 percent of world trade is carried by the international shipping industry.

“It is a largely invisible driver of global trade,” Smith said.

“The threat of piracy is one which the industry has had to address since the advent of international trade, and the most recent evolution in Somalia, and the more recent developments off Nigeria show that the problem continues to be a significant one,” Smith said.

Smith said that marine insurers see themselves as an integral part of the shipping sector.

“Insurers can, and do, work alongside the other stakeholders in the shipping industry, including governments and regulators, in order to help reduce the risks that pirate groups pose to international trade,” Smith said.

Via: http://www.propertycasualty360.com/

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