Maritime Security

Kenya’s assault on Somalia may reduce piracy ransoms.

Leaders of Kenya, Uganda and Somalia have committed to defeat Islamist Al-Shabaab rebels in Somalia.  Israel is also said to be increasing support for the battle against these terrorists.

The president of Israel has apparently said that his country will “make everything available” for Kenya to secure its borders and boost internal security.

The Kenyan military operation against Al Shabaab in Somalia has helped reduce ransom demands on captured ships as pirates seek to close deals.

The amount of money that pirates are demanding has fallen by roughly 50% according to shipping experts.  It is said that the ransom amounts demanded could fall further once “Operation Linda Nchi” (Defend the Country) is completed.

An example of this is MV BILDA and its 27 crew, hijacked on 1st January 2011 en route to Dar-es-Salaam, Tanzania from Salalah, Oman.

The initial ransom demand was apparently $6 million however it has been reported that a payment of $2.6 million was made to secure the release.  MV BILDA was freed 11 months later on 3rd November 2011.

It is believed that the Al Shabaab militants are offering protection to pirates in exchange for cash, arms, and logistics.

The increase in piracy led to the price of ransoms to rise.  The highest amount paid to date is believed to be $13.5 million for the release of Greek flagged VLCC Irene SL hijacked in Feb 2011 and held for only 2 months.  The cargo was Kuwaiti crude oil estimated to be worth $200 million.

This year it is estimated that ransom payments exceed $120 million from the vessels and individuals released to date.

As a direct result of the increase in piracy the cost of insurance in the shipping sector has increased.  Shipping companies are taking further insurance to cover against war risk, kidnap and ransom.  This is addition to the conventional underwriting of cargo and hull.