Piracy near Australia soars

There has been a rapid increase in piracy throughout Indonesian waters, with attacks skyrocketing by almost 700% in the past five years.

The increasing risks for Australian businesses involved in the international shipping trade have been highlighted in a report from Allianz Global Corporate & Speciality (AGCS), Safety and Shipping Review 2014.

The report warns that, although most of these piracy incidents remain low-level, opportunistic thefts, there is the potential that attacks may escalate into a more organized model of piracy if they are not controlled.

“The shift of the piracy focus from the Gulf of Aden to a new hotspot in Indonesia should be of concern to all businesses in the Pacific region involved in international trade as all shipping between the region and Asia has to transverse these waters,” says AGCS Pacific Marine Manager Ron Johnson.

As well as heightened piracy activity near Australian shores, the increasing size of vessels is also creating concern in the international marine insurance industry.

Since June 2013, Triple-E class vessels have been operating. These mega-ships have a cargo capacity of up to 18,000 twenty-foot equivalent units (teu), the length of two football fields, two hockey rinks and two basketball courts combined.

The new level of cargo capability has spooked some underwriters, particularly in regard to cargo-salvage difficulties and safety in the event of offshore calamities, and, as a consequence, increased claims costs.

“Given Australia’s large coastline, and limited ports of refuge and repair facilities to handle such vessels, the arrival of these mega ships could heighten the risk to cargo owners,” Johnson says.

“And there are even larger vessels capable of up to 24,000 teu on the horizon and which are expected to come into service in 2018.”

With a 18,000 teu vessel approximating in an insured cargo value of $365 million, 24,000 teu-vessels are expected to have cargo sums insured of up to $480 million.

AGCS Hull and Marine Liabilities Global Product Leader Dr Sven Gerhard says: “A minor incident can really cause a major general average claim on these ships. Port infrastructure to load and unload such vessels is very limited, there are perhaps eight or nine ports in the world where the Emma Maersk can be unloaded and I doubt this will grow beyond say 16 in the next five to seven years.”

For more on megaships, see our feature here.