Piracy is costing the shipping industry a staggering $7–12 billion a year according to a report released by the One Earth Future Foundation — a figure that is highlighted in the soaring maritime insurance premiums facing ship and cargo owners.
Recent reports also showed that world governments are shelling out at least $1.3bn trying to control the problem.
The piracy action affects marine insurance markets in total — that is, underwriting considerations, terms of cover, and premiums payable by the shipowners. The steep increase in sea- piracy cases has had serious implications for insurance. It affects all the shipping companies placing ‘extra insurance costs’ on them — and should come as no surprise that the payment of ransom to pirates has substantially raised the cost of claims.
Reports suggest that shipowners navigating the Gulf of Aden are seeing insurance premiums for kidnap and ransom (K&R) increase by ten times as piracy escalates.
And that is not the only problem shipowners face when it comes to escalating insurance costs. For those who have protection models in place, they must bear the premiums and problems associated with being the employer — essentially meaning if someone, namely their armed guard, gets shot on board their vessel, it is their problem and no one else’s, to deal with.
Another hurdle to overcome is the issue of some Registries not allowing armed guards to board a client vessel: if an owner takes a guard on board and his flag forbids it, his insurance will be void.
However, there are ways for ship and cargo owners to bring the costs down — and increase the protection of their vessels at the same time.
There are significant savings to be gained in insurance premiums by employing a service that will give your vessel full- scale security and protection against potential pirate attacks.
A view held by many insurers is that a shipowner who decides to use maritime security — such as that offered by Typhon — is reducing the risk of being kidnapped and held for ransom.
Amid the growing reports that piracy is on the rise year-on- year,Typhon, headed up by founder and CEO Anthony Sharp, has emerged with plans to protect convoys of up to ten ships with an armed vessel, complete with helicopter. For the first time it will allow shipowners and charterers to hire, on a commercial basis, an ocean-going close protection vessel (CPV) to provide a comprehensive protection model for their crews, ships and cargoes.
Typhon plans to offer shipowners a comprehensive security solution to protect their vessels whilst in transit through the Gulf of Aden, the Indian Ocean and the Arabian Sea and will provide an armed patrol craft that will be launched from its CPV. This capability will be supported by unmanned aerial vehicles (UAVs) deployed in a watch-keeping/detection role.
Protecting vessels against piracy is not a new concept in itself but so far it’s been done primarily via vessel protection details: ships buying protection pick up a security team from one port and drop it off at another. Sharp said:“Typhon’s protection model is different — it’s
based on putting an exclusion zone around a convoy and protecting that zone, as well as the client vessel, helped by the deployment of UAVs that, at 10,000ft, can spot potential threats miles away. It’s a model built on prevention rather than aggression.”
The model will also encompass onshore operations room support in the UAE and London, and provision of real-time intelligence on latest pirate locations. This also solves the issue of Registries not allowing guards on board, as Typhon will protect vessels without actually being on the ship.
But one of Typhon’s biggest sales points is insurance. Sharp is keen to point out that a huge difference between his model and all the others out there is that Typhon will negotiate reduced insurance rates.
He added:“Rates have skyrocketed because it’s costing the industry $12bn a year when you add everything up. The ransoms paid out so far have been in the range of $280m to $1.2bn.”
Following discussions with insurance brokers, Sharp is aware that some shipowners who elect to deploy solely ‘ride-on’ guards are receiving 45–50% discounts on their kidnap and ransom insurance premiums.
Sharp said:“Typhon’s service offering goes further and is a much deeper service than solely providing guards. I have no doubt in my mind that we will be able to negotiate unbeatable rates for our clients.
“I have been told that Typhon’s protection model goes beyond any current models and would therefore be seen to reduce the insurance risk even further.
“It is my expectation that insurer syndicates would see us as a very positive development in the market and shipowners using our services will be offered even further reductions in their premiums.”
Typhon is owned and run by CEO Anthony Sharp, with ex- military chairman of commodities trading giant Glencore, Simon Murray, on board as chairman.
General Lord Dannatt, the UK’s ex-Chief of General Staff and current Constable of the Tower of London and General Sir Jack Deverell, the former Commander in Chief of the Allied Forces Nato, are on board as non-executive directors.


BIMCO publishes much-anticipated GUARDCON contract
BIMCO has announced the publication of the GUARDCON standard contract for the employment of security guards on vessels. This brand new contract has been developed to provide shipowners and private maritime security companies (PMSC) with a clearly worded and comprehensive standard contract to govern the employment and use of security guards, with or without firearms, on board merchant vessels. While BIMCO would not like to see the use of armed security guards on ships becoming institutionalized, it recognizes that, while the industry awaits a more permanent long-term solution, armed guards currently provide an effective deterrent to piracy attacks.
BIMCO’s Chief Officer Legal and Contractual Affairs, Grant Hunter said “In response to shipowners’ increasing demand for security services, an ever growing number of private maritime security companies have entered the market to meet that demand. In the absence of a standard contract for these services, shipowners and their P&I Clubs are currently faced with the difficult and time-consuming task of assessing large numbers of contracts from these security companies, all with varying terms and conditions. GUARDCON’s objective is to create a contractual benchmark for the employment of security services so that minimum levels of insurance cover for PMSCs are established and that adequate safeguards are put in place to ensure that liabilities and responsibilities are properly addressed and that all necessary permits and licences are obtained.”
According to BIMCO Deputy Secretary General, Søren Larsen,“GUARDCON has been drafted in just a little over three months by a small group of experts drawn from shipowners, underwriters, P&I Clubs and lawyers with first- hand experience of working with contracts for security services.The speed at which GUARDCON has been drafted is a considerable credit to the drafting group whose members devoted many long hours free of charge to the project.”
The members of the drafting team are Tor Langrud, Wilhelmsen, Norway (Chairman); Daniel Carr, Stolt-Nielsen, USA; Chris South, West of England P&I Club; Andrew Moulton, Ascot Underwriters; Stephen Askins, Ince & Co; and Elinor Dautlich, Holman Fenwick Willan.
The drafting work was not however conducted in isolation; consultations were conducted with PMSCs and insurance underwriters during the process and the drafts were also carefully scrutinized by members of the International Group of P&I Clubs. BIMCO’s own influential Documentary Committee also played their usual essential role by thoroughly reviewing GUARDCON to ensure it met the standards expected of a BIMCO standard contract.
BIMCO has also published Guidance on the Rules for the Use of Force (RUF) to accompany GUARDCON which will undoubtedly be of great assistance to owners and private maritime security companies when drawing up and agreeing RUF for their own purposes.
 
ABOUT BIMCO
BIMCO is the largest of the international shipping associations representing ship-owners controlling around 65% of the world’s tonnage and with members in more than 120 countries drawn from a broad range of stakeholders having a vested interest in the shipping industry, including managers, brokers and agents. The association’s main objective is to protect its global membership through the provision of quality information and advice, and while promoting fair business practices, facilitate harmonization and standardization of commercial shipping practices and contracts. In support of its commitment to promote the development and application of global regulatory instruments, BIMCO is accredited as a non-governmental organization (NGO) with all relevant United Nations organs. In an effort to promote its agenda and objectives, the association maintains a close dialogue with Governments and diplomatic representations around the world including maritime administrations, regulatory institutions and other stakeholders within the areas of EU, the USA and Asia.

 
 
Prevention is better than cure, says AtoBviaC
It is no secret that piracy attacks are becoming more audacious and that methods necessary to combat such attacks are becoming more extreme. Local restrictions often mean that shipowners can’t always obtain reliable armed protection, attacks are now expected up to 120 nautical miles off the coast of some areas and concern exists over moves to ban ransom payments — the choices for operators are fraught with difficulty.
AtoBviaC Plc has recently introduced a new Anti-Piracy Routeing Tool in the BP Shipping Marine Distance Tables. “The Anti-Piracy Control allows ship operators to make informed decisions on voyages which may need to avoid piracy areas,” says Captain Trevor Hall, Director of AtoBviaC. “With the amount of uncertainty in the industry and the depressed freight rates currently being experienced, the implication of avoiding piracy has to be carefully measured.
“The AtoBviaC tool enables the ship operator to select routes based on the most current intelligence, and accurately calculate the time and fuel implications of the voyage. In many cases this can work out to be considerably more accurate than the other available options and provides a level of self-determination that is missing from other solutions.”
Anti- Piracy Routeing from AtoBviaC within the BP Shipping Marine Distance Tables is based upon information on piracy activity obtained on a regular basis from the Joint War Committee bulletins, and from specific routeings requested by ship operators. All routes calculated are navigable, taking account of the need to keep suitable distances off shoals, wrecks, coasts and obstructions and also avoid oil field development
areas. The routes are reviewed weekly and updates are issued at two-monthly intervals or more frequently if significant changes need to be made.
The BP Shipping Marine Distance Tables are widely used within the marine industry and contains all ports, offshore terminals and transhipment areas needed by its many users, particularly: Worldscale; oil tankers; gas carriers (LNG & LPG); the container trade and the bulk shipping of coal and ore.




‘Not paying ransoms would be massively detrimental’
Any move at government level to ban the payment of ransoms to pirates would have a massively detrimental effect on the risk to the world’s seafarers and the global economy, according to Alastair Evitt, Managing Director of Meridian Marine Management, president of InterManager and the newly appointed chairman of the Save Our Seafarers Campaign.
Addressing the opening session of this year’s Connecticut Maritime Association (CMA) conference in Stamford, USA, Evitt said not only would such a ban have an impact on the willingness of any crew to transit high risk areas, but any owner who then did not pay a ransom for his crew and vessel would be unlikely to ever attract a crew again.
Responding to comments that came out of the recent London conference on Somalia where governments called for a move to not pay ransoms to pirates, he said many vessels would be forced to reroute with the subsequent effect on costs. “And for those forced to transit pirate areas, insurance premiums would become prohibitive — to say nothing of the fact that in many cases vessels would become a total loss after six months,” he said.
“I for one would not sanction one of Meridian’s vessels transiting the high risk area — if there was no ultimate solution in the event of a vessel and her crew being held captive.”
Addressing conference delegates, he said: “I speak as
Foiled: the capture of Somali pirates.
Chairman of the Save Our Seafarers campaign when I say that we are opposing this apparent change of political will and hope we can rely on your support.”
Referring to the future for the seafarer, Evitt said crew recruitment, retention and development would resurface as a major challenge as the shipping industry recovers from this recession:“What will tomorrow’s crews expect by way of remuneration (to make up for stagnant salaries): social media onboard and security to name but a few. As an industry I believe we will also have to pay more attention to cultural issues and onboard integration.”
Working as part of a team is essential in difficult economic times, and never more so than when it comes to the interaction between ship operators and suppliers. “Shipoperating requires joined-up thinking between everyone involved and your ship supplier should be seen as a key team player who can make a significant contribution if they are allowed to,” he said.
So how can ship managers provide better services to their clients? Evitt said:“InterManager is investing both time and money in the development of operational and safety key performance indicators and is convinced that with the right measurement tools, facilitating improved management services to our principles will be the next game changer in our sector.”