Representatives from the UK Chamber of Shipping, insurance market and legal profession gave evidence to the UK Parliament’s Foreign Affairs Committee as part of the MPs’ detailed investigation into piracy off the coast of Somalia.
Giving evidence on 22 June, Andrew Voke of the Lloyd’s Market Association told the committee that shipowners are paying $120 million annually to London insurers to protect them against the financial implications of a hijack by Somali pirates. He noted that insurers paid out more to owners whose vessels were seized than they received in premiums.
He said: “We are providing coverage to our existing client base, with whom we have a far-reaching and long-term relationship because we see the rest of their business. A number of underwriters have attempted to stop providing the coverage, and we’ll be happy then to pass it on to another market, because the premiums generated are at the moment inadequate, and even if they are constantly readdressed and recalculated, the problem is worsening almost at a pace that you can’t keep up with.”
About 28,000 vessels a year transit the region affected by Somali pirates, said Mark Brownrigg, director general of the UK’s Chamber of Shipping. Rerouting to avoid pirates would cost a large container ship between $185,000 and $300,000, he estimated. Additional insurance costs for each transit are between $30,000 and $60,000, according to the association.
Maritime lawyer and piracy specialist Stephen Askins of Ince and Co told the committee that vessels and their crew are being released more quickly now, with a vessel on average being held for 150 days, down from the average of 250 days at the beginning of 2011. He also noted that around half of all 50% of the armed security is provided by UK nationals or foreign companies run by UK nationals, but that “most of the companies are simply ignoring UK licensing laws.”