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Monday, August 08, 2005

Latest ONI World Wide Threat to Shipping (3 August)

Go here and click on the date. Highlights:
1. SOMALIA: Per 29 Jul Italian press reporting, the
Italian Navy will dispatch a Soldati-class deep-sea patrol vessel
to the Indian Ocean to protect Italian merchant ships operating in
the region, starting Aug 05. This move follows armed attacks on
two Italian owned merchant vessels off the coast of Somalia within
the space of a week. In a statement, the Italian Defense Ministry
cited “the recent armed attacks on national merchant ships off
Somalia, and the wider resurgence of piracy in the Indian Ocean”
for dispatching the vessel. The vessel will be tasked with
surveillance and deterrence, as well as escorting Italian merchant
ships through international waters in which the risk of attack by
pirates is particularly high. The Italian Defense Ministry
explained such measures are necessary in order to tackle an
increasingly dangerous trend, which has led to the boarding
and capture of vessels by tough, will organized gangs (LM, LL).
2. STRAIT OF MALACCA: Malaysia, Indonesia, and Singapore
agree to conduct joint air patrols over the Strait of Malacca
beginning Sep 05 per 02 Aug reporting. Representatives explained
the three nations would deploy their own maritime aircraft for
surveillance. Planes offered by other countries would have to be
manned by military officials from one of the three nations. The
United States, Japan, and China have offered assistance, but
Malaysia and Indonesia have opposed foreign military involvement
in the strait, citing concerns over territorial sovereignty.
Thailand, which also attended the meeting, said it needed more
time to consider the proposal for air surveillance over the
strait. Last year, the three nations set up coordinated naval
patrols, but pirate attacks have persisted .3. NEW WAR-RISK AREAS: The London insurance market
Joint War Committee, in a sweeping overhaul of their listed
war-risk areas, provided new guidelines to underwriters listing a
total of 21 areas worldwide in jeopardy of “war, strike, terrorism
and related perils” per 01 Jul article. Areas specified included
the Strait of Malacca and adjacent ports in Indonesia. The Joint
War Committee has a purely advisory role and insurers remain free
to decide whether to seek additional premiums, but industry sources
report receiving notice of cancellation with effect from 31 Jul for the
Strait of Malacca. Members of the committee based decisions on
reports from their staff and from the external consulting agency of
Aegis Defence Services. A Lloyd’sList article dated 24 Jun
explains that some ship owners who have had to pay ransom for return
of crew, have found that their insurance claims are treated as
discretionary by their P&I insurer and that reimbursement varies
from full, to partial, or none at all. Ironically, if a pirate kills
a crewmember, the P & I club is liable to pay a death compensation
claim. In at least one case, a vessel owner was able to successfully
appeal a decision of nonpayment by showing he acted prudently in
securing the release of his crew, and that the ransom payment was
less than the insurance club would have had to pay in death
compensation. An insurance executive noted that if kidnappers know
their ransom demands are covered under insurance, then the amounts
demanded would increase dramatically. As it stands, kidnappers in
the Strait of Malacca have generally stayed in the US$50,000 to
US$100,000 range with room to negotiate lower sums on a case by
case basis. ONI NOTE: Now that notice of cancellation of war risk
clauses has been issued for the Strait of Malacca, operators will
have to determine if they wish to secure and pay for more expensive
special war risk cover for transits through the Strait. Cruise
operators may be especially hard hit, with their greater personal
liability issues. If risk is perceived commensurate with new higher
rates, some cruise operators may choose to abandon the area rather
than face hostile passenger inquiries. Cancellation of standard war
risk clauses usually results from actual war risk related loss or
expectation of it, and not from the kind of “analysis” performed
by Aegis Defence Services. It is unclear to ONI analysts if the
cancellation of standard war risk clauses would imply that piracy,
now typically covered under protection and indemnity insurance,
would be transferred to a covered war risk or whether only risks
from terrorist action would be covered under the new war risk
policy. If it is the latter case, it is unclear whether the
underwriter or the insured bears the burden of showing that
damages from an attack were due to terrorism, rather than piracy.

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