Somali pirates closer to India; premiums up

Somali pirates closer to India; premiums up

Mumbai: Somalian pirates appear to have expanded their reach to Indian maritime waters and insurers are responding by increasing premiums, resulting in higher costs for shipping firms.

On 9 January, Somalian pirates hijacked Indian ship MSV Al Musa near New Mangalore port, according to regulator Directorate General of Shipping (DGS). The ship was sailing from Gujarat to Salalah in Oman with a cargo of vegetables.

On 5 December, the pirates hijacked another vessel, MV Jahan Moni, from Bangladesh, according to DGS. The incident happened within 270 nautical miles of the Indian mainland and less than 70 nautical miles from Lakshadweep.

Attacks such as these have prompted the joint war committee (JWC), representing London’s marine insurance community and independent security consultants, to add the Indian Ocean and the Arabian Sea as areas that could see attacks, terror strikes and related perils for ships.

Mint has reviewed a 16 December 2010 circular signed by Neil Roberts, secretary of JWC to this effect.

From 1 January, according to this note, the Arabian Sea up to 75 degrees east longitude and the Indian Ocean have been notified as areas where additional war risk insurance will be levied by war risk underwriters.

The two areas are listed as “areas of perceived enhanced risk" by underwriters in the UK.

“This expanded area which is deemed to be of high risk of piracy attack will, in effect, raise premiums for vessels in a far wider area and apply to areas close to Indian coast (outside 12 nautical miles offshore). Vessels engaged in trade with India will definitely be impacted as would Indian vessels," said a letter written by the Indian National Shipowners’ Association (Insa) to defence authorities. Mint has reviewed the letter.

The lobby group said 17 hijacks and 29 attacks against vessels happened in 2010 in roughly the same region.

The International Maritime Bureau (IMB), a non-profit organization established to act as a focal point in the fight against all types of maritime crime and malpractice, is also convinced the pirates are expanding their operations.

“There have been attacks in Indian Ocean and Arabian Sea. This seems to be quite serious. Pirates are also using small hijacked ships and hijacked merchant vessels to conduct piracy operations as ‘mother vessels’ to sail far from the Somali coast to attack and hijack passing vessels," said an IMB spokesperson.

A Monday report from IMB said more people were taken hostage at sea in 2010 than ever before.

All told, the pirates captured 1,181 sailors, killed eight and hijacked 53 ships. And ships reported 445 attacks in the year, 10% higher than in 2009.

Apart from the risks to the freedom and lives of crew, the attacks and hijacks also increase insurance premiums.

For instance, the minimum additional premium on account of such attacks for a very large crude carrier valued at $64 million (Rs290 crore) and carrying a cargo of 260,000 million tonnes (mt), will be around $200,000 per month. A bulk carrier (valued at $50 million) carrying 50 mt will have to pay an additional premium of $50,000 a month.

The increase will directly add to the cost of India’s exports and imports. Already, the country’s largest shipping company Shipping Corp. of India Ltd, has increased its piracy surcharge from $40 to $80 for every 20 ft container. The increase came into effect on 15 January.

In keeping with good anti-piracy practices recommended by the International Maritime Organization, a United Nations specialized agency with responsibility for the safety and security of shipping, vessels will have to ply at full speed through the Arabian Sea, adding to fuel costs.

Anjali Kumar, a spokesperson for Great Eastern Shipping Co. Ltd, India’s largest private sector shipping firm, said companies would have to adopt pre-emptive measures to counter-attacks by pirates, but added that insurance premiums have only increased marginally till now.

Industry lobby Insa, however, is trying to ensure that the impact is minimized.

Its letter to the defence ministry says: “It will be necessary to be able to demonstrate to the joint war committee the reduction in threat within our coast so that JWC can be prevailed upon to redemarcate the zones."