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India Fights Lloyd's Expanding Piracy Zone
India is lobbying Lloyd's of London to reverse its expansion of the area judged prone to pirate attacks to cover almost all of the nation's west coast after insurance costs surged as much as 300-fold this year.
A reversal by Lloyd's would reduce insurance costs after some premiums skyrocketed to as much as $150,000 per voyage from $500, the Indian National Shipowners' Association said, hurting shippers' earnings. Essar Shipping Ltd. and Varun Shipping Co. are among companies that say the move is eroding margins as they struggle with overcapacity and rising costs. "Typically ships bought insurance for the three days they were moving through the Gulf of Aden -- now they have to pay for the additional 10 days" through the Indian Ocean, said Sean Woollerson, an insurance broker at London-based Jardine Lloyd Thompson Group Plc (JLT), which specializes in shipping. The larger zone means about 28,000 more journeys a year are liable to higher premiums than the 22,000 made in the old zone, he said.
India's government and shipping companies gave evidence last month to the Joint War Committee that shows increased Indian naval patrols have driven the pirate threat away. The government will continue to press for the decision to be overturned, Mohandas said in his New Delhi office. Varun Shipping is paying an extra $70,000 per voyage to cover the risk of piracy on about 16 ships that travel between India and the Middle East, Managing Director Yudhishthir D. Khatau said. "The extra cost is harming us very seriously," he said. The decision to expand the zone was driven by increasing attacks and the sophistication shown by pirates able to strike further out at sea, according to Neil Roberts, a senior executive of the Joint War Committee. The Indian navy currently has four ships patrolling the area at all times and has formed an inter-ministerial committee to negotiate with hijackers and advise vessel owners. There are about three dozen military ships altogether now engaged in anti- piracy operations, according to an April report by the U.S. Congressional Research Service. The Indian government's response to piracy has been inadequate and won't bring down premiums, said P.K. Ghosh, who writes about piracy for the New Delhi-based Observer Research Foundation. "This problem needs to be tackled at its root, which is in Somalia," said Ghosh. "So far there is a lack of will in the international community to do this." About 52 percent of the 530 million tons handled by India's 13 major ports in 2008-2009 went through the west coast, according to government data. Indian trade grew from 14 percent of gross domestic product in 1988 to about 51 percent in 2009, according to the World Bank and World Trade Organization. The efforts of more than 20 navies, including the U.S., U.K. and China, failed to prevent a record surge in pirate attacks last year.
Hamilton, Bermuda-based Frontline Ltd., the world's biggest supertanker operator, last week said diverting to avoid pirates in the area costs about $100,000 per trip in extra fuel. War-risk insurance premiums typically cost 0.1 percent of the value of a ship, according to Jardine Lloyd Thompson's Woollerson. While some insurance charges may have risen as much as the Indian National Shipowners' Association estimates, for most vessel operators the additional charges are "much more modest," he said. There were 17 hijackings and 29 cases of vessels being fired at in the new zone last year, according to the Joint War Committee. This year, that has dropped to one successful hijacking and 12 attacks, according to the London-based International Maritime Bureau. "These waters are far, far safer than many places across the globe," said Essar's Ramakrishnan. Posted by: Steve White 2011-06-04 |
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