Kidnap premiums squeezed

William Miller, divisional director of Willis Kidnap and Ransom, says premiums to cover against Somali piracy have fallen because more insurers are offering cover, Bloomberg reports

He said buying $5m of coverage now costs as little as $15,000 per voyage, half the peak rate in 2008.

Kidnap and ransom premiums climbed to $100m last year as pirate attacks on the 25,000 ships passing through the Gulf of Aden rose 70%. That prompted more insurers, including Aspen, Ascot and Chubb, to offer marine K&R coverage.

Ransom rises

The average ransom has almost doubled to between $3.5m and $4m since Chubb entered the market 22 months ago, said K&R Manager Greg Bangs, adding that the company expects to expand its piracy business further.

“At first the rates were a little higher than they should have been and then over time insurers realised they could reduce their rates and still make money,” said Bangs.

The decline in rates has deterred Ascot from writing policies since being authorised to offer kidnap and ransom coverage last November, said Andrew Moulton, a marine underwriter at the Lloyd’s arm of AIG.