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Piracy in 2024: Challenges in Marine Insurance

Piracy, a persistent threat in the maritime world, is increasingly relevant in 2024 for the shipping and insurance industries.

The International Maritime Bureau’s Piracy Reporting Centre highlights a global rise in piracy activities against shipping in the first nine months of 2023, underscoring the need for vigilance and adapted strategies.

Understanding Piracy in the Modern Context:

As per Article 101 of the United Nations Convention on the Law of the Sea (UNCLOS, 1982), piracy encompasses:

  • Illegal acts of violence, detention, or depredation for private ends by the crew or passengers of a private ship or aircraft, directed against ships or aircraft on the high seas or outside any state’s jurisdiction.
  • Voluntary participation in operating a pirate ship or aircraft.
  • Incitement or facilitation of these acts.

Currently, common incidents involve attacks and hijackings, often resulting in the payment of substantial ransoms.

 

Challenges in Marine Insurance for 2024

A multifaceted approach is necessary, combining risk assessment, policy adaptation, legal considerations, and technological advancements.

 

  1. Risk Assessment and Management

This involves identifying and continually updating knowledge on geographical hotspots for piracy. These hotspots are dynamic, influenced by geopolitical, economic, and social changes. Insurers must remain vigilant to accurately assess risks.

For example, many operators are now opting to sail around the Cape of Good Hope instead of through the Red Sea and the Suez Canal.

 Understanding the threat profiles prevalent in these regions is crucial. This requires a detailed analysis of threats, which vary across geographic areas. Insurers must examine the specific tactics employed by pirates, the types of vessels or cargoes targeted, and the frequency of piracy incidents.

 

  1. Policy Adaptation and Coverage Nuances

In adapting their policies to the evolving landscape of maritime piracy, insurers must focus on crafting customized coverage that caters to the unique threats posed by piracy. This includes addressing specific risks such as hijackings, cargo theft, and crew kidnappings. The incorporation of specialized clauses like War Risk and Kidnap & Ransom (K&R) into these policies is becoming increasingly essential for comprehensive protection in piracy-prone areas.

In addition, incorporating BIMCO’s VOYWAR and CONWARTIME clauses into charter party agreements is a crucial aspect of policy adaptation, ensuring clear risk management and liability delineation in contracts.

 

  1. Legal and Contractual Frameworks

Insurers must also stay informed about sanctions and legal changes in different regions. This includes a keen focus on transport contracts, ensuring they are aligned with the latest legal standards and effectively manage the risks associated with piracy, armed robbery and conflict at sea.

  1. Technological Advancements in Risk Mitigation

The year 2024 is witnessing an increased reliance on technology for piracy risk mitigation. Advanced satellite tracking and AI-based predictive analytics are at the forefront of this technological revolution, providing dynamic and real-time risk assessment capabilities. These advancements not only enhance predictive accuracy but also offer new ways to proactively respond to potential threats.

 

Shipping companies must be prepared with frameworks to navigate these challenges in 2024, while also capitalizing on opportunities presented by advancing technology. The resurgence of piracy is a trend that the shipping industry continues to face.

For those interested, the following link provides an interactive map with recently reported piracy incidents: Live Piracy Map.

For those interested in a deeper understanding of the subject, it’s highly recommended to explore the book «Piracy, Armed Robbery and Conflict at Sea: 2024-25 Edition,» which offers an in-depth analysis and insights into these issues. This publication can be found here.

Sources:

We are Claimar, your Third Party Administration (TPA) management partner, skilled and expert in marine services.

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