Asia piracy incidents hit 5-year high in 2020, shipping insurance rates firm
Sea robbery and piracy related incidents across Asia increased 17% year on year to just under 100 in 2020, amid consistent threat of possible attacks by the Abu Sayyaf Group, or ASG, prompting warnings for enhanced vigilance, an international watchdog monitoring the trend said over the weekend Jan 16-17.
Overall, such incidents in Asia, excluding the attempted ones, were up 32% from 2019 to a five-year high in 2020, ReCAAP said. ReCAAP is the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia.
ReCAAP’s annual data release comes close on the heels of attack on tankers in the Middle East.
THREAT KEEPS SHIPPING INSURANCE RATES HIGH, COSTS STEADY
At present, maritime security in Asia is under sharp focus, particularly in the aftermath of the attack on tankers near the Persian Gulf late last year, which has kept shipping insurance rates firm due to an additional war risk premia.
The Strait of Hormuz, which leads to the Persian Gulf, is a critical chokepoint through which 30% of the world’s seaborne oil passes through.
“The war risk premia is holding firm for all ships moving in the region because of the prevailing threat,” said a maritime insurance executive.
Last month, an LR1 tanker owned by Hafnia suffered an explosion after being hit by an external object early Dec. 14 while discharging a gasoline cargo at Saudi Arabia’s western port of Jeddah, sources with the direct knowledge of the matter told S&P Global Platts.
The insurance premium varies from ship to ship depending on its age and depreciation, but another maritime insurance executive said due to the prevailing situation, any decline in rates is unlikely.
Such premia is typically paid as an actual expense, which the owners bill to the charterer after the voyage, or transit is completed. The premia vary based on the location of the ship, its transit route, age and flag. Unlike freight, insurance premia is typically not in public domain.
In mid-December 2020, the Asia-Pacific Long Range 1, or LR1, tanker rates had hit their highest in over six months, with benchmark Persian Gulf-Japan route at 110 Worldscale points, due to strong demand.
RISK NOT ABATING ANYTIME SOON
A direct impact of such incidents is that Persian Gulf is not going to be removed from the high-risk zone that it is in for almost two years now, said a clean tankers broker in Singapore.
The Joint War Committee of insurance body Lloyd’s Market Association had added the Persian Gulf and adjacent waters including parts of Gulf of Oman to the list of areas under risk of “Hull War, Piracy, Terrorism and related perils” in May 2019.
According to ReCAAP, the trend of increase in piracy and sea robbery was seen across Asia including areas such as Bangladesh, India, the Philippines, Vietnam, Singapore Straits and South China Sea, ReCAAP said.
Most of the incidents in the Singapore Straits involved bigger ships such as bulk carriers and tankers and took place in the eastbound lane of the Traffic Separation Scheme.
“In view of the increase of incidents, law enforcement agencies in Asia should enhance surveillance, increase patrols and respond promptly to arrest and prosecute the perpetrators, Masafumi Kuroki, Executive Director of ReCAAP said in a virtual conference.
Singapore is located along one of the world’s busiest waterways, with close to 1,000 ships anchored there at any given time. A ship calls at Singapore port every two to three minutes, bringing the total to around 130,000 ships a year and making it critical for maritime passage in the region to be piracy-free.
From industrial raw materials such as coal to essential food items like rice, commodities worth billions of dollars move on commercial ships near the Sulu Sea and the Celebes Sea, industry estimates showed.
The abduction of crew in the Sulu-Celebes Seas and waters off Eastern Sabah remains a concern, Kuroki said. In the last five years, of the 86 abducted crew in the Sulu-Celebes Seas, 71 were released while 11 either died or were killed, according to the ReCAAP estimates.
Established in 2006, ReCAAP is the first regional government-to-government agreement to promote and enhance cooperation against piracy and armed robbery against ships in Asia. It has 20 member countries, including all members of ASEAN except Malaysia and Indonesia, with France and Germany expected to join in future.