WA piracy will remain a headache for ship owners in 2014; AIG offers special insurance package to deal with hijackings

Nigeria will remain a serious piracy hot-spot in 2014, as the country still resists the allowing of non-Nigerian armed guards on board vessels plying its waters. This according to Mr.Alex Kemp, Managing Director with NYA International, a specialist crisis prevention and response consultancy, who spoke with Hellenic Shipping News Worldwide. As such, one of the world’s leading insurance groups, American International Group Inc. (AIG) is tailoring its offerings to provide a full solution package to handle piracy incidents.
The company recently presented in a special event in Athens, its offering, dubbed Maritime Kidnap & Ransom (K&R), a piracy insurance programme for the maritime market. The programme becomes active once there’s been a piracy hijacing. The insurance company has partnered with NYA International to provide with advice and support in hostage and ransom negotiations, coverage for the ransom, legal liability and a series of other coverages, related with costs during a piracy hostage situation.
Hellenic Shipping News Worldwide has interviewed both Mr. Jon Gregory, Head of Special Risk, Global Financial Lines with AIG, as well as Mr. Alex Kemp, Managing Director with NYA International.

Lately, Somalia has taken a back stage when it comes to making Piracy headlines. Instead, we’ve seen the emergence of other piracy “hot-spots” like Guinea and West Africa in general. Why has this occurred?

(Alex Kemp) Somali piracy is currently being disrupted by a multitude of factors, including increased use of armed guards, international coalition naval activity and the application of BMP4 measures. However, pirates continue to conduct probing operations. Pirates seem to understand they cannot defeat the PMSCs, but are regularly scoping out vessels to assess their levels of security and vigilance. Piracy is unlikely to return to 2009 levels in the short to medium term, however, it is highly conceivable that an unguarded vessel could be taken; in this scenario a significant vessel would be held for a protracted period of time and be subject to a high ransom demand.

The situation in West Africa is very different – acts of piracy are conducted by trained, experienced and well-armed militants. This is nothing new however, it has been ongoing for many years, mostly in the form of bulk cargo attacks and bunker (extended duration cargo) theft and occasionally a crew kidnap – 2013 has seen a significant rise in targeted crew kidnappings. Generally speaking, they start as a piracy incident and end in a land based K&R scenario (7 crew were taken in 2012 compared to over 35 in the last 12 months).

Which will be the prevailing trend in maritime piracy incidents moving forward in 2014? Which areas will continue to cause the most problems?

(AK) Continued counter-piracy operations from the international community and continued efforts to stabilize Somalia bodes well. However there is a risk of complacency and/or cost cutting measure amongst elements of the shipping community, and it is possible that another hijack will occur at some point.

Nigeria will continue to resist the use of foreign (i.e. non-Nigerian armed guards) making safeguarding vessels in its waters difficult. If the Islamist threat in the country continues/increases then international (US) pressure will become overwhelming for Nigeria. If not then piracy attacks will continue – particularly the targeting of high profile crew members for kidnap and ransom.

Still, the general trend is towards a decline of maritime hijackings? Why has this occurred and do you believe this will continue to be the case in 2014 as well?

(AK) In terms of trends: In East Africa, yes this trend is likely to continue, though it is not unlikely that a success attack will happen again at some point. Activity in West Africa is unlikely to decline in the foreseeable future.

Do you believe that hired guards are the answer to the problem, at least for the time being? After all, they’ve proven to be rather effective, essentially negating the risk of a hijacking, since until now no vessel with hired guards has been successfully hijacked.

(AK) The use of armed guards, alongside other measures, has proved to be extremely effective in East Africa. However the same solution is not an option in West Africa, where the use of overseas armed guard teams is not permitted.

What immediate actions should ship owners undertake in case of a hijacking?

(AK) There are many considerations that the owner must take into account in the immediate aftermath of an incident, which are too numerous to list here. Having internal crisis management plans that have been rehearsed in advance of an incident taking place, not only make the organization more capable and resilient in the handling of an incident, but often help the organization mitigate against such an incident in the first instance through enhanced awareness of the challenges faced.

A lot of times, there’s confusion regarding a potential incident, which various contradicting reports surfacing. Most of this is caused by the lack of official releases from the ship owner’s part? Is this something which should be widely adopted, or do we have cases when even the owner isn’t quite aware of what’s been going on with a particular vessel?

(AK) At the outset of any crisis the situation is often fluid with many conflicting reports/accounts of what has occurred. It is important that the owner/operator only deals with facts and does not speculate on what may/may not have occurred.

Who is responsible for delivering the ransom?

(AK) The ship owner or operator is ultimately responsible for the delivery of the ransom, although it is strongly recommended that the owner seek advice from an experienced crisis response consultancy in the planning and coordination of this highly complex high-risk operation – hopefully the ship owner/operator will have engaged such a consultancy from the outset of the incident. It is also strongly recommended that an international marine law firm with experience in these matters is engaged early in proceedings and that the services of an organization specialized in this delivery of ransom be sought.

In terms of piracy-related products, what does AIG offer to the maritime industry?

(Jon Gregory) AIG provides a full solution package, offering the expertise of NYA International to provide the client with advice and support during negotiations, coverage for the Ransom, the loss of Ransom in transit, legal liability, and other expenses including but not limited to crew salaries, the costs of maritime lawyers, personal accident, public relations, rest and rehabilitation, bunkering and port costs. We are also happy to extend coverage to insure the loss of hire as well.

Is the cost of this insurance policy higher or lower than hiring armed guards?

(JG) Five years ago the costs were relatively similar, but nowadays insurance for Kidnap and Ransom is significantly lower making it a very economic purchase for most owners.

Nikos Roussanoglou, Hellenic Shipping News Worldwide