Tracking Piracy

Piracy is an increasing threat. Recent news reports from the southern Somalia/Kenya region have raised awareness of the threat.

From a business insurance aspect, such threats have a direct relationship to shipping costs. Since piracy in a particular well-known and well-traveled area has increased, premiums and reinsurance costs will increase. Maritime insurance is typically provided as a percentage of hull value and insurers and reinsurers are busy setting marketable increases based upon the risk. Sometimes the increases will not be in proportion to the actual threat. Rather, the increases will have a publicity or psychological aspect. This is similar to what happened after September 11. Prior to September 11, 2001, insurance for terrorism was a "throw-in" coverage added with most commercial policies. After September 11, terrorism insurance was removed, reinsurance for insurers dried up and premiums for a formerly "free" coverage became prohibitive and unrelated to the actual risk. Consumers are unlikely to notice the increase of maritime insurance premiums because the cost is spread over the cost of the entire cargo, but small percentage increases equate to millions of dollars.

What do these pirates look like? How pervasive is the threat? In 1992, the International Maritime Bureau established the Piracy Reporting Centre (PRC) in Kuala Lumpur, Malaysia. It is a twenty-four hour reporting center for acts of piracy. The Reporting Centre's website features a "live piracy" map, warnings and a weekly piracy report. The site also has photos of suspected pirate "mother" ships. These are not the mythical rogues of Hollywood imagination, these are lawless criminals affecting the price of everything shipped in global commerce.