As the number of vessels and crew seized by piracy gangs off the coast of Somalia and out into the Indian Ocean continues to rise insurers have said they are now not going to seek to dissuade shipowners for carrying armed guards. However, it is not a view shared by the entire market and that includes reinsurers.

The debate has been prompted by the decision by the International Union of Marine Insurance to say it is now adopting a neutral approach when it comes to the use of armed guards on vessels. It has since  has welcomed the announcement by the International Chamber of Shipping (ICS) that it is also now taking a more neutral position.

IUMI said it was up to individual insurers whether to provide cover for ships and operators if private armed guards were employed on board.

However it is not the view of all and in a recent interview with the Reuters news agency Dieter Berg, head of the marine division at Munich Re expressed his concern that bringing armed men on board vessels may only worsen matters.

He said his concern was such a move would be viewed as overtly hostile by the piracy gangs and risks provoking more aggressive attacks.

"This raises the danger of escalation," Mr Berg told Reuters. "Pirates are often themselves former security forces and will adapt to the threat. At some point they'll shoot back."

His view was backed by one Lloyd’s underwriter who told Reinsurance: “When the piracy issue became a major problems were approached by a range of firms who said they could solve the problem by the use of armed protection.

“But there is a real concern as if you have armed guards on boats it will lead to the potential for greater levels of weaponry to be used by the piracy gangs who already have access to rocket propelled grenades.

“We are also hull insurers and to have a firefight involving heavy calibre weapons is not going to help limit the damage to the vessel. There are also those is us who believe that it will also put crew in danger as the piracy gangs will treat everyone on board as armed and dangerous.”

ICS chairman Spyros Polemis said when he announced the group’s decision: “ICS has had to acknowledge that the decision to engage armed guards, whether military or private, should be made by the ship operator after due consideration of all risks, and subject to approval of the vessel’s flag state and insurers.”

IUMI President Ole Wikborg added: “We anticipate that more industry organisations will go down this route as the problem escalates. Frustrated by the weak resolve on the part of governments and international agencies to take effective action to stop the piracy juggernaut in the Gulf of Aden and the Indian Ocean, the shipping industry is now reaching a point where it must take decisive – and, if necessary, deadly – action at sea to end this huge and dangerous business.

“At a time when the industry is struggling against weak freight markets and other adverse factors such as sanctions, it cannot afford to bleed more money from pirate activity, nor to see an increasing number of vessels and their cargoes captured. That goes for insurers too.

“Above all else, the fact that more than 700 seafarers are being held hostage, many for very long periods, and that attacks on ships are becoming more violent, must surely tip the scales in many cases where shipowners have to make painful decisions.” 

The head of underwriting at the Lloyd’s Market Association (LMA) Neil Smith headed to Germany this month to give the re/insurance industry's view of the issue to a high powered meeting of NATO officers.

NATO staged the three day event to discuss the issues surrounding the piracy menace and what can and should be done to combat the threat.

Mr Smith was invited to offer NATO officers an insight into the London market’s perspective on piracy and explain how the market handles this risk.

“NATO is keen to get a broader, non-military perspective on piracy,” he said. “They particularly want to understand its impact on insurers, both operational and financial.

“The LMA believes this is a very positive initiative and I’m delighted to have been asked to talk to these officers.”

EU NAVFOR is the European Union’s naval force combating piracy in the waters off Somalia. NATO personnel make up a major part of the force.