Pirates are on the increase and shipowners are being advised to take extra precautions in dangerous areas.
The recent murder of New Zealand yachtsman Sir Peter Blake on the Amazon in Brazil has highlighted the threat posed by modern-day pirates. Not since piracy's heyday in the 17th and 18th centuries, when buccaneers such as Henry Morgan and Blackbeard struck fear in the hearts of mariners, has piracy been so prevalent.
Marine insurers have cause to be concerned. Insurance consultant Mike McFarlane says that many underwriters do not appreciate the growing threat of sizeable claims from acts of piracy.
McFarlane adds: "Until now, the risk of piracy has only really been taken into account when small vessels sail into known high-risk areas, such as the South China Sea. With incidents of piracy on the increase, this attitude must clearly change if the industry is not to face substantial losses."
The London-based International Maritime Bureau (IMB) reports that worldwide incidents of piracy have increased by more than 400% since 1991. In the first six months of 2001, the number of recorded attacks jumped to 178, compared to 32 incidents in the same period ten years ago. Annual figures rose from 107 in 1991 to 469 in 2000.
There is also a notable increase in the level of violence used by pirates. In 1999, just three seafarers were killed, compared to 72 in 2000.
Last year saw some particularly vicious attacks. Pirates abducted seven fishermen off the coast of West Bengal, and threatened to remove and sell their kidneys if their ransom was not paid. Round-the-world yachtsman Bob Medd was left for dead on his drifting boat off the coast of Mexico after pirates, who had robbed him of cash and valuables, slashed his neck from ear to ear.
While small-time pirates will often just go for the personal belongings of the crew or the wages on board, organised groups tend to target a particular kind of cargo - fuel oil and electrical goods are favourites.
They will typically set the ship's crew adrift or force them to jump overboard. After renaming the ship, they register it at a local consulate with the help of a bribe and false documents. The pirates then sail the ship to a different port where they offload the cargo to a criminal partner or unsuspecting buyer.
The IMB warns ship operators to check the papers of their crew more carefully. It says that, of the thousands of cases reported of unqualified sailors using false documents, some have involved pirates in disguise.
The Caribbean and the South American coastline are favourite haunts for pirates preying on luxury yachts. There is often little to deter the gangs. Brazil, for example, has no coastguard and its federal police have no boats. Most attacks on commercial shipping, though, take place in the waters around Southeast Asia and Africa.
More than 70% of all recorded incidents occur in Indonesian waters, where the narrow channels, shallow reefs and heavy traffic force boats to move slowly. The numerous tiny islands and inlets make getaways easy and detection almost impossible.
The Straits of Malacca between Indonesia and Malaysia are so perilous that many shipping companies insist on their vessels being armed or having an escort.
The UN International Maritime Organisation, however, warns against having guns on board as they can easily escalate a situation during an attack. This can result in harsher reprisals once a ship is taken. There is also the danger of guns falling into the wrong hands, as well as creating potential military, political and legal difficulties once the ship is in territorial waters.
Security expert Trevor Hollingsbee suggests brokers and insurers should be advising clients of certain security measures including the use of searchlights, loud alarms and high-pressure water hoses. He recommends against offering further resistance once pirates have boarded.
Some companies are developing elaborate ways of detecting and repelling boarders. The Japanese firm Nippon Yusen Kaisen has installed the Seajack alarm system to its fleet of 450 vessels. If intruders get on board, they break the light of a fibre-optic circuit and trigger the alarm.
The IMB advocates installing a satellite tracking system, such as Shiploc, which it says has proved invaluable in locating and recovering hijacked vessels. It also advises against anchoring in hazardous waters and to keep radio contact to a minimum.
One Dutch shipowner, deciding that a more radical approach was needed, installed electrical wiring along all sides of one of its vessels. The wires deliver a shock of 10,000 volts to any unsuspecting pirate. The searchlights then automatically go on, and a sound-system broadcasts at an ear-blasting 118 decibels.
If a vessel is sailing in a hazardous area, underwriters - or at least, those who are aware of the risk - would expect reasonable security measures to be adopted. And if these resulted in an improved claims experience, this would be reflected in future premiums charged.
There are various reasons for the upsurge in piracy. Hollingsbee points to deteriorating economic conditions and internal security problems as the main causes. He says some of Indonesia's coastal inhabitants have turned to piracy to supplement their dwindling incomes. The country's security forces may also be taking part in piracy themselves.
Colonel Tim Spicer, former mercenary and now chief executive officer of security firm Sandline International, warns that terrorist organisations such as the Tamil Tigers in
Sri Lanka are planning attacks on maritime targets. Rebel groups in Indonesia and the Philippines are also behind many of the incidents.
Organised crime is also involved in piracy. Investigators have identified five big criminal gangs operating in Southeast Asia, while triads control piracy along the coast of China. Off the Horn of Africa, Somalian warlords control fishing rights and enforce exclusion zones with particular brutality.
Modern ship design doesn't help either. Smaller crews can operate larger vessels, which are then more vulnerable to attack.
A ship is usually protected in international waters by the country or state whose flag it flies. With the increasing use of flags of convenience, shipping companies can expect little or no military or diplomatic support from states such as Panama or Cyprus.
There has been much talk of improving security and co-operation between states, but in the absence of significant progress the IMB is backing a proposal to stamp the hulls of vessels with a permanent identity code. The IMB says this will make it more difficult for pirates to disguise hijacked vessels.
With no sign on the horizon of a let-up in pirate activity, insurers can expect some big claims until the maritime industry gets to grip with this growing menace. N
What brokers should be advising their clients