The rising frequency of pirate attacks on vessels plying Southeast Asia’s shipping lanes has spawned a new insurance product from Aspen Insurance.
The piracy and marine hijack cover for Southeast Asia follows previous Aspen marine piracy, kidnap and ransom (K&R) products created first for Gulf of Aden and Indian Ocean threat of Somali piracy, then for West African piracy and maritime crime in the Gulf of Guinea.
Aspen’s “tailored” Southeast Asia product is a hybrid between K&R cover and other protections, similar in design to the piracy cover the insurer created for West African piracy at the start of 2013.
Limits include: between $1-10m for K&R; unlimited response fees from crisis consultants; $1-10m for cargo loss, of which $1m for fuel oil stolen or used under duress; $250,000 personal injury per head, up to a $1m limit; $1m for legal liability; and $100,000 for hull damage; and up to $1m for additional expenses.
While the Somali piracy threat has been contained and faded since 2012, attacks in the Gulf of Guinea have risen – but it is in Southeast Asia where the most attacks take place.
“Southeast Asia has seen a massive increase in the frequency of attacks,” Henry MacHale, global head of crisis management at Aspen APJ
He noted that the insurance market for K&R is secretive, with claims quietly paid, while many shipping firms lacking cover are similarly sheepish about reporting losses, meaning the whole topic of piracy remains under-reported.
Some rivals have scaled back their underwriting in the face of recent losses taken in West Africa, he notes, although the whole marine K&R sector globally probably amounts to only some $25-30m premium annually, MacHale estimated.
“In Southeast Asia the characteristics are true pirate attacks, lasting only a couple of hours, and stealing bunkers
“While there is still a ransom element in some attacks, it is not their standard operating procedure,” MacHale added.
MacHale noted that last year a pleasure yacht was pirated, and its western crew taken hostage for ransom, and while kidnapping westerners remains a risk, it is not the usual threat for the regional commercial shipping the policy at which the policy is aimed.
The product is aimed at owners and charterers, with typical durations being for a single month, encompassing several ports of call while transiting high risk waters such as those of the Malacca Strait for Singapore, as well as other parts of Malaysia and the Philippines.
Longer durations are also possible, he stressed, with covers available for extended periods or three or six months.
“Standard pricing rates would be $1,500 or more for a single transit, going up to $50-60,000 for longer periods,” he said.
While the overall limit is capped at $10m, typical covers would be $1-5m, according to MacHale.
At present there is no additional premium charged as standard for transiting the region’s higher risk areas, such as along the lines set previously by the Lloyd’s joint war committee for the Gulf of Guinea and for the Gulf of Aden and Indian Ocean (much reduced for the latter since 2015).
“When the Indian Ocean piracy slowed down, we increased our presence in the Gulf of Guinea market,” said MacHale. “We built up the Gulf of Guinea product, and gained traction to gain a dominant market share – and now we’re looking to do the same in Southeast Asia.”
Asked whether there would be a rationale for expanding to write the business more locally within Southeast Asia, MacHale noted that the Bermudian re/insurer’s K&R business was restricted to those countries in which ransom payments are legal.
Ransom payments are illegal in Southeast Asia’s biggest re/insurance hub of Singapore, for instance – home to Lloyd’s of London’s biggest overseas hub and a growing number of international re/insurers – Aspen among them.
“We’re always looking for opportunities to expand,” said MacHale. “But it has to be within the context of our other lines of business.”