Shipping cos buy ransom cover for piracy-prone routes

KOLKATA: Insurers owe this to the pirates of Somalia. All top shipping lines in India, including Shipping Corporation of India (SCI), Great Eastern Shipping Co and Essar Shipping, are buying kidnap & ransom (K&R) policy for virtually every voyage on piracy-prone maritime routes like the Gulf of Aden, off the Somali coast.

���Somalian coast, South China Sea, Indian Ocean and Bangladesh���s Chittagong coastline have seen piracy jump manifold, forcing local shipping lines to buy K&R covers for their crew every time their vessels navigate through these waters,��� said a top executive of a private general insurer, who did not wish to be named.

Somali pirates operating in the Gulf of Aden - linking Suez Canal and Red Sea with the Indian Ocean to make the shortest sea route from Asia to Europe - are the most notorious. They were in the news early this week for attacking a US cargo and holding its crew hostages until French troops freed them. They are believed to be holding more than 280 crewmen on 15 ships.

���Somali pirates often demand ransoms in excess of $2-3 million,��� said SCI chairman and managing director S Hajara. ���Every time one of our ships need to pass the region, we take the cover,��� he added. Essar Shipping Ports & Logistics CEO Anup Sharma and Great Eastern Shipping spokesperson Anjali Kumar, too, confirmed they buy K&R covers for crew whenever their ships pass through the Suez Canal.

���The cover is always for a definite period and the sum assured can go up to $5 million,��� said Essar���s Capt Sharma.
About 15-20 SCI vessels and 5-7 Great Eastern ships pass through the Gulf of Aden every month, said the company officials. ���An alternative route through the Cape of Good Hope would take nearly 15 extra days leading to cost escalations,���explained Ms Kumar.

While officials in shipping companies and insurers refused to share premium charges and other commercial details citing confidentiality clauses, KPMG director Shashwat Sharma feels the premium for a sum assured for $2 million would be anywhere between $100,000 and $150,000.

However, if companies go for, say, a year-long cover for an entire fleet, the premium would be lesser at 3-5% of the sum assured, he added. At present, all the Indian shipping lines get their K&R covers on a per voyage basis. Nearly every general insurer, private and public, offers K&R cover. Globally, American International Group (AIG) is a leader in K&R cover. Back home, Tata AIG General Insurance has been selling K&R cover at a furious pace.