A few years ago, the Disney Corporation experienced renewed interest and growth from its humorous and adventurous take on an old theme. Its series of movies based on its “Pirates of the Caribbean” Ride captured the imagination of millions. However, the laughs and romance provided by those films are in stark contrast to real life. Piracy is a growing problem on a global scale. Increasingly, rightful property owners are being deprived of both their property and the opportunity to profit from their work. The loss caused by modern piracy is growing in frequency and severity

Ocean marine coverage is concerned with protecting businesses involved in transporting persons and cargo over the world’s oceans. The protection is divided into  several major categories such as the risk of loss or destruction of vessels, loss or destruction of cargo and liability for injury to passengers and to property that belongs to those passengers and, especially to other parties (such as another object that an insured ship may strike). However, piracy is another source of age-old loss that has recently become more serious.

Piracy Defined

Essentially, maritime piracy refers to acts involving at least two vessels, a pirate and a victim vessel. Pirate acts are those which are violent, including detention, and that are perpetrated by private individuals, against other private parties. Therefore, acts involving military personnel or those which are fueled by political motives are not considered to be piracy.  Since piracy involves at least two vessels, it is distinct from hi-jackings where onboard individuals unlawfully wrest control of a vessel from another party.

The scale of piracy can is quite broad, ranging from simple acts of passengers being robbed of cash and other valuables, up to an entire vessel being stolen and used for further criminal activity. While minor acts do not affect a vessels crew or passengers, major acts may involve rightful vessel occupants being set adrift or, much worse, being killed in order to gain possession of the ship. Naturally, the amount of planning and criminal organization increases with the magnitude of the act. Major criminal operations that involve false documentation, use of partners, willing harbors and ship re-registration, may create losses in the hundreds of millions globally.

Piracy Hot Spots

Acts of piracy are much more prevalent in certain parts of the world where lack of enforcement and low incident reporting creates a favorable environment. In recent years, the choke point of the Suez Canal and the waters of Southeast Asia have been extremely problematic. Piracy is becoming more popular because of the relatively low risk of capture and the high rewards associated with successful operations. Personal luxury items (particularly watches and jewelry) and cargos are, by their nature, fairly easily disposed of as markets are plentiful for such goods.

According to some statistics, cargo vessels, fishing vessels and tankers are the most popular targets. Further, the majority of pirate incidents are completed quite rapidly as, increasingly, pirates have favored working in small crews, using high-powered speedboats.

Financial Impact

While international figures concerning the impact of piracy and related activity are difficult to determine, one study estimated that, over a five-year period ending in 2002, losses in Southeast Asia’s most problematic areas (Indonesia, Malaysia, and The Philippines) may have totaled nearly $16 billion (in U.S. dollars).

Piracy – A Broader Scope

In some respects, piracy may be considered to be a subset of criminal activity that affects, primarily, cargo owners, carriers (shipping companies) and insurance companies. In order to better understand the situations that these groups have to deal with, some researchers have proposed that a broader classification system be used. One proposal suggests that criminal activities should be categorized as follows:

Corruption – acts against vessels that include the involvement of port authorities and government officials

Maritime Terrorism – refers to attacks against vessels that are committed by terrorists groups (typically motivated by political reasons).

Piracy – refers to any attacks against vessels while moving in both territorial and international waters (high seas).

Sea Robbery – refers to thefts that occur to vessels that are stationary at berth (or anchored), but do not involve violence against persons.

At a minimum, a more refined categorization can assist in identifying the true scope of maritime losses, develop more accurate loss data and also facilitate improved loss control methods.

Loss Control

Managing maritime criminal activity is a complicated and expensive proposition. However, some organizations, such as the International Maritime Bureau, the International Chamber of Commerce, the International Marine Organization, the World Trade Organization and others, are pursuing efforts to help combat such activity. These efforts include:

Increased use of model piracy laws

Entering and enforcement of additional treaties

Increased use of port inspections, and port and coastal water patrols

Use of improved ship and cargo tracking methods (including satellite tracking)

Loss prevention measures may also be improved on individual ships by:

use of adequate crews

use of efficient crew screening methods

installation and maintenance of adequate security systems

use of newer ID transmitting systems which are less vulnerable to interception, and

greater use of onboard, armed security.

COPYRIGHT: Insurance Publishing Plus, Inc. 2008

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