It is in many ways indicative of the issues that piracy has presented to the market that there are few underwriters who are keen to talk on the record about the problems. However, the industry’s leading marine insurance organisation has fire the first salvo in a call to arms to international governments to do far more then they are currently doing to solve the problems which have beset the waters from the coast of Somalia, the Gulf of Aden and now across the entire Indian Ocean.

Norway’s Ole Wikborg, Director and senior underwriter at the Norwegian Hull Club and current President of the International Union of Marine insurance (IUMI) has issued the call urging governments of maritime nations to take urgent, cohesive and decisive action, whether through the United Nations or not, to rid the seas of the scourge of piracy. “There has been too much prevarication for too long,” he said.

“Those who suffer the most are the seafarers and efforts must be increased to ensure their safety,” he added “Politicians and bureaucrats seem to care little about the unrelenting increase in pirate activity and the threat faced by crews when their ships pass through the piracy infested areas, most notably the Indian Ocean and the Gulf of Aden. It would appear that scant regard was paid to the IMO’s ‘Year of the Seafarer’. It is worth repeating yet again that merchant ships and those who sail them are vital to our very existence.

“The International Maritime Bureau, the industry watchdog, has reported an all-time peak in pirate activity and hijackings. Its latest figures show that Somali pirates hold 746 hostages and 32 merchant vessels – truly, the forgotten mariners. Many of the captive officers and seamen have been held for many, many months. What must they and their families be going through?

“Up to Jan 21, the Somali pirates have been responsible for 31 incidents, six hijackings, and taken 136 hostages – and there is still a week to the end of the month.

“In the background, of course, the shipowners involved, not to mention a lot of cargo owners, along with insurers, are paying a very high price because of ransoms and loss of trade and profits.”

The worst may be yet to come, he claimed. The pirates were attempting to capture vessels of any type, including fully-laden tankers and gas carriers, and had succeeded early on in one high-profile hijacking of a VLCC.   And just recently a cruiseship was in their sights but the master skilfully outsped the pirate boats, and it is reported that other cruiseships have previously been targeted.

He described the recent incident when a South Korean naval vessel tracked a ship in the Arabian Sea that had been hijacked a week earlier, when Korean commandos stormed the ship and rescued all 21 crew, killing eight pirates and capturing several others, as “encouraging”.

“It must be hoped that this incident will deter those pirates searching the seas for a sitting duck from pursuing their intentions,” he added.

IUMI said a major concern was that the “piracy nightmare” was deterring many young people from going to sea.

Official figures released in January revealed that 1,200 people were taken hostage by pirates in 2010.

“Somali pirates had extended their operations to include most of the Arabian Sea and a significant part of the Indian Ocean down the east coast of Africa,” added Mr Wikborg.  “The total cost is estimated at a staggering $238 million.  Marine underwriters were bearing the brunt of these costs, but they continued to provide the financial cushion and security for shipowners trading in dangerous waters.”

One underlying trend which is of immediate concern for insurers is the length of time the piracy gangs and now holding captured vessels.

As the gangs hold out for higher ransoms they are keeping the vessels for over 200 days on average and this can trigger a denial of access clause in many policies which have a six month period before the owners can claim a total loss.

The fear almost turned into reality earlier this year when an owner whose vessel had been detained for eight months filed a claim for a total loss only for the vessel to be released the following week.

A claim averted but the warning has been received with brokers believing another such claim or the current trend for rising seizure period continuing will see underwriters reaching for their wordings.

The Deepwater Horizon loss has seen reinsurers looking at the energy and marine risk pricing models but how long before the piracy issue impacts the approach to the war risk coverages?