RIYADH: Saudi insurance market analysts have expressed concern that the abduction by Somali pirates of the Sirius Star and other ships could lead to a tremendous increase in maritime insurance premiums.
“This will inevitably increase the price of fuel and shipping charges as well as prices of essential commodities,” the analysts said, adding that international marine insurance companies have not specified the premium for piracy coverage.
“The companies will be charging different premiums depending on the situation and the prevailing prices at the time of voyage,” one analyst said.
Mohammed Al-Dossary, CEO of Wajeef, an insurance intermediary company, said if countries failed to prevent piracy, insurance and shipping charges would go up considerably. “Most insurance companies will be hesitant to provide cover to shipping lines that pass by the Gulf of Aden in the future,” he added.
Basim Awdah, general manager of Arabian Shield Insurance, said the continuation of piracy at the Gulf of Aden and Somali coasts would lead to increasing insurance charges by international companies.
“They may also put certain conditions on ships sailing by these troubled areas,” he pointed out.
Users of international shipping lines are expecting that the regional conference in Cairo would set out mechanisms to protect this vital maritime route. There were also calls for immediate intervention of the United Nations to stop piracy that threatens energy supplies.
Insurance premiums on ships have been changing rapidly and they often reflect the degree of danger faced by ships. Lloyds Insurance has urged ship owners to review the measures they have taken to protect their ships while passing through the Gulf of Aden.
The British company said the crew of the ship should be given a number to contact when they face attack. Crewmembers should also be given regular training on how to deal with emergency situations.
The company also instructed insurance firms in the region that the moment a ship enters the Gulf of Aden it should contact maritime units and other ships available in the region.
In May 2008, the Joint War Committee added the Gulf of Aden, located between Somalia and Yemen, to a list of places at high threat of hull war, strikes, terrorism and related perils. It is now comparable to the likes of Iraq in terms of insurance risk, according to the committee.
The Gulf provides access to the Suez Canal and should vessels be forced to abandon the use of the canal, they face adding 4,500 miles onto their journey from Europe to Asia. Saudi Arabia is the world’s largest oil producer and exporter.