Vast improvements in tackling piracy in Somalia and the Gulf of Guinea have resulted in global attacks declining for a fourth successive year, but seafarers around the world need to stay vigilant to guard against this threat, whichever quarter it may come from, says Captain Rahul Khanna of Allianz Global Corporate & Specialty.
The number of pirate attacks on commercial shipping continued to decline overall around the globe last year, dropping 7% y-o-y to 245 (compared with 264 in 2013), according to the International Maritime Bureau (IMB). This is the fourth successive year in which the number of attacks have decreased. This fall is the result of joint industry and cross-border cooperation to tackle the root causes of piracy on land, as well as using armed force at sea, to deter attacks.
Fall in reported attacks in Africa
In the Gulf of Aden, the highly successful EU Naval Force’s Operation Atalanta – largely responsible for the 95% fall in reported attacks by Somali pirates since the start of this decade from 219 in 2010 to 11 in 2014 – has been extended through to December 2016.
On the west coast of Africa, attempts to reduce piracy incidents have also proved successful with reported incidents off Nigeria alone down over 40% y-o-y from 31 to 18 in 2014. Ongoing programmes include the EU’s Critical Maritime Routes Gulf of Guinea (CRIMGO) initiative, aimed at complementing and reinforcing regional or international initiatives against piracy and armed robbery at sea, and the implementation of an International Maritime Organization Code of Conduct, addressing the repression of piracy, armed robbery against ships, and illicit maritime activity in west and central Africa.
However, a caveat for the not-insignificant progress made over the past 12 months is that there is still considerable under-reporting of piracy incidents in the Gulf of Guinea region.
Unlike the Somali pirates, those in West Africa have been more inclined to hijack a vessel to steal the cargo rather than hold the crew or the ship. This trend has resulted in a drop in the value of such insurance claims, as the costs paid to release vessels and cargo are generally significantly higher than the thefts of oil. Often, the West Africa thefts are to fulfil an order, so it is not unusual for only part of a cargo of oil to be stolen.
Concern over Southeast Asia waters
While African campaigns have proved effective, piracy attacks in Southeast Asian waters continue to rise. IMB figures reveal that there were 141 reported attacks in these waters in 2014, up 10% y-o-y (128 in 2013). Treaties between Malaysia, Indonesia, Thailand and Singapore to prevent piracy in the Malacca Strait have kept incidents here down to an average of one to two annually since 2010. However, incidents in waters off Malaysia (24), up 160% over the past year alone, and off Indonesia (100), the top global hotspot, drove last year’s activity, although Indonesian incidents actually declined slightly y-o-y in 2014 (106 in 2013).
Attacks in Southeast Asian waters are also responsible for a 75% annual increase in the number of vessels hijacked – 21 in 2014 compared to 12 in 2013. The IMB attributes this increase entirely to the rise in small coastal tanker hijackings in this region.
Bangladesh represented a new piracy hotspot during 2014, with the number of reported incidents increasing to 21 compared with 12 a year earlier (up 75%). The majority of incidents are low level thefts from vessels, although three crew were taken hostage and two crew injured in two separate incidents, according to the IMB.
At the start of March 2015, the number of reported piracy incidents to the IMB during the year-to-date totalled 29. Piracy is a problem which, unfortunately, is here to stay. We have seen it rise and fall in the Gulf of Aden and to an extent in West Africa, only to rise again in the Far East. The modus operandi is different in each area but the bottom line is that merchant ships are easy targets. Seafarers around the world need to stay vigilant to guard against this threat, whichever quarter it may come from.
Captain Rahul Khanna is Global Head of Marine Risk Consulting with Allianz Global Corporate & Specialty.
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The risks of fallen states
The recent uptick in war and political unrest has put increasing pressure on the shipping supply chain. The risks fallen states present is an area which will increase.
Conflicts in the Middle East, including the Syrian civil war and unrest in Egypt, have had a direct impact on the safety of the shipping industry. This impact is more pronounced when the increasing size of ships is taken into account as many are too big to utilise the Panama Canal and are restricted to the Suez Canal, which cuts directly through the heart of a number of volatile countries.
However, increasing reliance on this chokepoint could become problematic. Any time you take options away, you are leaving yourself at risk. We have to look at this holistically as the supply chain hinges on the weakest link. The bottom line is that the cargo has to make it from the manufacturer to the buyer – any disruption in any portion of that supply chain will result in an unsatisfactory outcome. In the present economic world in which we live, “just in time” delivery is the norm.
There is also an extended risk to safety with the rise in the number of failed and fallen states, for example in Libya, where a Greek tanker was bombed off the coast on 5 January 2015 by the Libyan Army.
The risks that fallen states present need to be monitored and need more attention from underwriters in order to draw proper conclusions when it comes to risk-based underwriting. Effectively, it is about understanding the exposure and drawing proper conclusions as part of the underwriting process when it comes to, for example, setting warranties, making a loss-control assessment mandatory, ensuring full compliance with loss control recommendations or working on the insureds’ net retentions.
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