by Drew Feldman
Posted: June 2, 2011
Modern piracy is a growth industry. The International Maritime Bureau (IMB) reported in April that during the first three months of 2011, pirates attacked 142 vessels in international waters, seizing 18 vessels, three of them tankers with more than 100,000 deadweight tons—an all-time high number of pirate attacks for any three-month period. During all of 2010, pirates attacked 445 vessels, capturing 53 of them. Some highly publicized incidents of piracy in recent years have spurred governments and nongovernmental maritime organizations to coordinate their efforts to suppress piracy, with some limited successes in some places.
Yet, the problem grows. Somalia has become infamous in recent decades as a nation-sized haven for pirates, and for good reason. Some 70 percent of total pirate attacks worldwide during the first quarter of 2011 occurred off the coast of Somalia, either in the Gulf of Aden to the north of the country or in the Indian Ocean to the southeast, sometimes hundreds of kilometers off shore. But, Somalia isn’t the only hotbed of modern piracy. Elsewhere during the same quarter, nine attacks occurred off Malaysia and five happened near the coast of Nigeria. A scattering of other places have seen pirate attacks on commercial vessels in recent years as well, such as in the vast Indonesian archipelago.
Chatham House, a London-based think tank, estimates that piracy costs the global economy between $7 billion and $12 billion annually, and further that Somali pirates are responsible for perhaps as much as 95 percent of that total. Those are wide-ranging estimates, which only illustrates how murky things can get when calculating the costs of a widespread criminal activity. According to a separate study released in April by the economic consultancy Geopolicity, the global cost of piracy could be as much as $15 billion by 2015.
Whatever the actual totals, it’s clear that the costs of piracy are high, and borne largely but not exclusively by shippers, who find themselves paying for security equipment and training, insurance premiums to mitigate the risk, and, in some cases, ransoms and other costs associated with a ship being held hostage. But the largest expenditure for the shipping industry—an estimated $2.4 to $3 billion, according to a report by One Earth Future, a private foundation—arises from re-routing ships to avoid high-risk areas.
Complicating matters is a disturbing recent trend of greater violence by pirates. The IMB states that during the first quarter of 2011, pirates murdered seven crew members and injured 34. Five years ago, during the first quarter of 2006, just two injuries and no murders were reported.
The business of piracy
Whatever romantic notions we have about the pirates of previous centuries, there shouldn’t be any doubt that modern piracy is a stone-cold business. It’s an unlawful business and one detrimental to shipping interests and international commerce, but nevertheless an operation whose guiding purpose is commercial in nature. That makes Somali and other pirates largely the concern of workaday ships of commerce that ply danger zones, though non-commercial vessels are at risk as well.
Wherever piracy occurs, it’s the result of a confluence of factors (and it’s an age-old problem; early in his life, no less a personage than Julius Caesar was captured by pirates). The recipe for piracy is this: a seafaring but poor people who live near a prosperous trade route, combined with little or no government control of their territory. Somalia is a text book example. The country has not had a functioning government for about 20 years, and is essentially a lawless patchwork of quarreling warlords, tribal entities and terrorist groups lording over a population that gets by on about $500 a year per person.
Moreover, the Somalis have a long history of seafaring, especially as fishermen. As such, they have jealously guarded their fishing grounds for years, using their vessels to drive away foreign trawlers. As the government of Somalia melted into anarchy, this “coast guard” discovered new opportunities as pirates, and as they grew experienced, they started venturing further out and seizing larger vessels such as bulk cargo containers and oil tankers. Somali pirates are now known to strike in an area of roughly 2.5 million square nautical miles off Somalia’s coastline, which is an increase of about one million nautical miles from only two years ago, according to Geopolicity.
The usual modus operandi for pirates, Somalis especially but others as well, is to attack early in the morning, using small, speedy skiffs to approach a target vessel. Often the skiffs themselves are launched from “motherships” that can range hundreds, or even thousands, of kilometers off shore. Once next to their prey, the pirates use grappling hooks to attach ladders to the side of the vessel, and then climb aboard, typically armed with AK-47s. Speed is of the essence during a pirate attack. Their goal is to waylay the crew and capture the ship’s bridge as quickly as possible.
Once they capture a ship, the pirates are interested in one thing: ransom. The cargo itself is largely irrelevant. The only important thing about the cargo is that there’s an owner somewhere that wants it, and the ship, back and the crew released. The pirates will be happy to do that for a large fee.
Somali pirates take their captured vessels to the coast of Somalia and keep them there, but sometimes disperse their hostages. Negotiations then begin, typically through an intermediary organization that specializes in dealing with pirates (by long distance, of course), and often the process takes several months. Eventually, a ransom that averages in the range of $ 4 million to $5 million is dropped from a small airplane for the pirates to pick up and divide among themselves, after which the ship and hostages are released. For an ordinary Somali, the economic incentive to be a pirate is clear. A successful raid might net him thousands of dollars, a considerable fortune in Somalia. The pirate higher-ups and their allies, including land-based warlords who protect the pirates’ lair, probably stand to make a good deal more.
Protection against pirates
Statistically speaking, the risk of being taken by pirates while transiting near Somalia is actually fairly small and it’s even lower elsewhere in the world. About 21,000 vessels transit the Gulf of Aden each year, and another 10,000 ply the Indian Ocean within striking distance of Somalia. Since only 49 ships were seized by Somali pirates in 2010, only a fraction of the vessels sailing in that part of the world end up in their clutches; a minuscule number, unless it happens to be your ship. In fact, among all of the risks involved in shipping cargo from point A to point B, piracy may represent the most significant risk for ships operating in the parts of the world where pirates operate.
How can ship owners and charterers take steps to protect their vessels, crew and cargos from modern day seafaring predators? Even before sending a ship into such risky waters, adequate insurance is necessary. Some hull and war risk insurance policies cover aspects of piracy, but there may be gaps in protection. More recently an insurance product known as a kidnap and ransom (K&R) policy has been tailored to more specifically address the problem of piracy. Depending on the policy, K&R insurance might not only pay the ransom itself, but also the costs of negotiation and delivering it, along with such expenses as loss of hire (business revenue), travel costs, medical expenses, and should the worst happen, death benefits for crewmen.
Well worth consulting is Best Management Practices to Deter Piracy off the Coast of Somalia and in the Arabian Sea, (BMP3) which details how to protect vessels against pirates. The publication is specific to the Somali pirate threat, and not all of the measures it suggests apply to every type of ship, but it’s nevertheless a good guide to help mitigate the risk of piracy.
BMP3 strongly recommends that ships navigate within the Internationally Recommended Transit Corridor (IRTC) through the Gulf of Aden, where naval forces are concentrated. Also, if possible, ships should participate in a “group transit” plan, which groups vessels together by speed for maximum protection as they transit through the IRTC. If it isn’t possible to transit through the IRTC—or even if it is, considering that the transit corridor isn’t an absolute guarantee against piracy—it behooves ships to take their own measures to protect themselves against pirates. Simply moving at a speed over 18 knots can often prevent pirates from boarding a ship, for example.
Since pirates typically use grappling hooks and ladders to board vessels underway, physical barriers can be used to thwart them, such as well-placed razor wire. Also, the use of automated water (or foam) guns has been found to be useful for knocking pirates who are trying to board a vessel into the drink. When physical barriers fail, some ships have employed a safe haven—“citadel” is the term for a long-term safe haven—to which the crew can retreat to hold off the pirates until help arrives. Ideally, such a space would have self-contained air-conditioning, emergency rations, water supply, and other useful features. wt
Drew Feldman is a vice president and worldwide ocean marine manager for the Chubb Group of Insurance Companies. He can be reached at dfeldman@chubb.com.
