The Pirate & the Common Man!

Piracy on the high seas is on the rise & I receive questions about this scourge fairly frequently from land lubbers.

However, how does piracy affect a normal citizen of the world?

Piracy threat increases insurance premium


Small and mid-sized shipping companies in the country are facing rough weather.

In addition to the setback in business following the recession, a spurt in piracy in the Gulf of Aden has become another major cause for concern in the shipping sector.The Gulf of Aden is considered to be the busiest sea route connecting the Indian Ocean to the Red Sea and the Suez Canal.

In view of the rising incidents of pirate attacks along this route, shipping firms will have to pay higher premiums for cover along this route.Capt Ajay Puri, Founder & Director, Skyrise Shipping, a mid-sized shipping company in New Delhi, says, “Repeated incidents of piracy in the Gulf of Aden in the last eight months have led to hijacking of several ships and delayed consignments. The big, small and mid-sized players in the shipping sector are facing the heat due to the recent turn of events. The decision to hike premium rates by insurance companies will come as a major blow to the shipping firms already reeling under an acute liquidity crisis.”With the menace of piracy persisting for over a year now, most insurance companies have increased their premium rates by over ten times. As per the revised rates, a shipping company will have to pay an extra premium of $10,000 to $20,000 per trip through the Gulf of Aden to cover the risk of hijacking.Manish Kothari, Director, Kothari Insurance Consultancy, opines, “In most cases, it has been found that the pirates in the region demand a ransom of nearly $2 million for larger ships. Even after intense negotiations, captive ships are rarely freed at a price less than $10,000. Naturally, it is not possible for small and mid-sized shipping companies to pay such huge amounts. Furthermore, they hesitate to report piracy attacks due to the fear of having to pay higher insurance premiums in the future.”Meanwhile, shipping companies are counting on leading maritime nations to take stronger measures to curb piracy on high seas.

However, while the most powerful nations of the world have a military presence in the area, pirates seem to hijack ships at will.

So, now if you have to pay the extra rupee for your wheat or petrol, you know whom to blame it on!