Another Piracy Policy Introduced

Responding to the risk from increased ship piracy in the Gulf of Aden, another insurance brokerage announced it is offering an insurance policy tailored to deal with some of the losses from an attack.

Chicago-based Aon said it is new offering a policy for those who charter boats, ship-owners and cargo owners, designed to cover loss of earnings from a ship being detained by pirates.

Aon’s move follows the Nov. 20 announcement of the Benfield Corporate Risk brokerage, after the capture of a Saudi Arabian oil tanker by Somali pirates, that it had produced a dedicated and exclusive Marine Ransom and Extortion policy.

Aon’s new policy offering comes after Sunday’s failed pirate attack on a cruise ship sailing in the Gulf of Aden.

Aon noted that there have been over 50 reported attacks off the coast of Somalia, with 32 vessels hijacked, in the first eight months of 2008.

According to the firm, the average duration of vessel seizure is 60 days. Aon said this means that those arranging charters have been incurring the cost of paying a charter hire for these additional days without receiving any extra income, and the delay means cargo owners are facing the risk of cancellation of contracts.

Aon said policies that have been in use cover physical loss or damage arising from piracy under hull protection and war clauses, with ransom dealt with by specific coverage.

Owners have also sought to recover as a sue-and-labor expense, according to the brokerage, but it explained that there has been a potential void in coverage for the financial impact of business interruption or loss of earnings.

Aon said its new policy is designed to cover:

• Charterers, who are paying for hiring the vessel even though the vessel is detained.

• Ship owners, who in the event of “contract frustration,” may lose out on charter revenues.

• Cargo owners, particularly of seasonal goods, who face cancelled contracts if the goods are held up.

• All other interested parties to a venture with an insurable interest.

Aon said the policy calls for the cover to be triggered from day one of the attack (with no deductible), and is a stand-alone policy to complement existing hull, war, cargo and protection and indemnity coverage.

"The recent spate of pirate attacks in the Gulf of Aden/Horn of Africa has highlighted how ship owners and charterers are incurring significant uninsured costs with no recourse,” said Aon’s head of marine hull risks, Peter Townsend.

The brokerage, he said, decided to do something by introducing new coverage available across the marine industry “so all parties affected by an attack could recover their loss of earnings."

"This year has seen our marine clients facing a raft of risks as ship-owners face tighter margins in the credit crunch and hull rates begin to increase,” added Aon’s U.K. marine team chief executive officer, Peter Dobbs. “Against this backdrop, Aon has stepped up its innovation to provide our clients with solutions that respond to the real challenges facing their businesses--such as piracy attacks."