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Piracy Jacks Up Insurance, Fuel Costs

Entering high-risk areas or navigating around South Africa both add millions

By Drew Nelles, Newser Staff

Posted Apr 13, 2009 12:42 AM CDT

(Newser) – Piracy in the Gulf of Aden is driving up shipping costs as companies are forced to choose between paying higher insurance or taking longer routes, the AP reports. Premiums have reportedly risen at least tenfold for travel near the Somali coast, and avoiding the Gulf of Aden by navigating around the African continent adds thousands of miles and millions in fuel costs.

"The pirates were the only people who had a good year in 2008," a security consultant says. “War risk” insurance covers acts of piracy, but costs more in high-risk areas like the Gulf of Aden. And experts say nowhere is safe anymore: "Whichever way you go you're going to run into pirate hotspots somewhere down the line,” one suggests.

[Images (3)]

[Quotes (2)]

Piracy attacks in the Gulf of Aden have moved south to avoid naval patrols.

This undated image shows the 17,000-ton container ship Maersk Alabama, which recently was hijacked by Somali pirates. (AP Photo/Maersk Line, file, ho)

Suspected Somali pirates are seen in a Mombasa court. Experts say Somali piracy is pushing up shipping insurance and fuel costs. (AP Photo, files)

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The problem with any diversion, be it through the south of the cape or elsewhere, is that it's going to have a commercial impact which will ultimately be borne by the consumer. - Graeme-Gibbon Brooks, managing director of Dryad Maritime Intelligence Service

Until recently, insurers regarded vessels as being relatively safe if they kept a reasonable distance from the Somali coast. - Neil Smith, Lloyd's Market Association manager

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Piracy Jacks Up Insurance, Fuel Costs