Pirate Watch: Tumbling dice

By Cmdr. Herb Carmen
Best Defense piracy czar

Are some ship masters rolling the dice as they pass through pirate infested waters to save operating costs? Are ship masters intentionally taking the path of least resistance and ignoring Best Management Practices to Deter Piracy in the Gulf of Aden and off the Coast of Somalia? It’s something we’ve been looking at when combing through data of successful pirate attacks. So, too, have the folks at Strategy Page.

In a recent post, Strategy Page points out that about a quarter of the ships passing through these waters are gambling with the safety and well-being of their ships and crews to save time and what can amount to tens of thousands of dollars in operating costs. In doing so, they increase the pirates’ chances of successfully hijacking their ship from 1 in 500 to 1 in 200. At a press conference on February 2nd, Rear Admiral Peter Hudson, Commander of EU NAVFOR Somalia, highlighted the fact that many of the ships hijacked were not registered with the Maritime Security Centre (Horn of Africa), were not reporting to the United Kingdom Maritime Trade Operations (UKMTO) office in Dubai, and were not following best management practices. 

Even when vessels are hijacked after ship masters have taken unnecessary risk, insurance companies may still reimburse shippers for ransoms and for costs resulting from the delays of the voyages. Ransoms are often covered under a marine policy’s "sue and labor" clause (see line 144 for an example), which covers costs incurred to avoid or mitigate a loss. A sue and labor clause requires the insured to protect damaged property from further loss once a loss has occurred. Often the insurers agree to reimburse the costs, even if costs exceed the policy limits of liability. 

In effect, the sue and labor clause may actually serve to encourage the escalation in payments of ransom. While insurance coverage for ransoms have reportedly increased more than tenfold due to the increased risk, demands for ransom have also risen dramatically in recent months.

Somali pirates are motivated by ransom payments. Perhaps insurers should stipulate that sue and labor reimbursements for ransoms will not be made if best management practices are not followed.