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Maritime security industry booms

Christopher Werth Sep 9, 2010

Maritime security industry booms

Christopher Werth Sep 9, 2010


Kai Ryssdal: There was an honest-to-gosh raid on a pirate ship off the coast of Somalia today. Twenty-four American Marines took back a German-owned ship that had been by commandeered by pirates earlier this week; a small blow against increasingly common disruptions of international trade.

A lot of the business of actually grappling with piracy happens not off the coast of Africa, but in London, as Christopher Werth reports.

Christopher Werth: Standing in front of a giant map of the Gulf of Aden, Tim Hart looks something like a weather forecaster.

Tim Hart: If you look at the Somali coast, yes, you have a few isolated attacks up here, but…”

He points to dozens of different-colored dots that mark pirate hotspots around Somalia.

Hart: We say red is a successful hijacking, orange is an attempted attack and yellow, we’ll have a suspicious vessel.

Hart is with the maritime security firm MUSC. Over the past couple of years, it’s begun working with shipping companies to track their vessels through areas where Somali pirates operate. From London, Hart and his team can be in constant contact with the ship’s captain, keeping an eye on where the latest attacks are happening.

Hart: The pirate industry within Somalia itself is a huge industry now, and it is obviously a major concern to a lot of shipping companies.

And while that pirate industry has grown, another lucrative industry has sprung up in London to deal with it. That includes security to repel pirates if they strike, and the payment of ransoms, if the pirates succeed.

Stephen Askins is a maritime lawyer with Ince & Co. He says once a ship is hijacked, its owners rely on a whole host of attorneys and negotiators to get it and the crew released. And the bills can add up quickly.

Stephen Askins: A $4 million ransom may actually be a $15 to $20 million problem.

Askins says it’s no accident that much of that work takes place in London.

Though tour boats make up the bulk of traffic on the River Thames today, for centuries, it was cargo ships that dominated the waters around the British capital. As a result, many ship owners still operate here, and they’re insured through the London insurance market.

Richard Scurrell is with Special Contingency Risks, which specializes in piracy insurance. He says where traditionally, shipping companies didn’t buy kidnap and ransom coverage; today, demand is booming.

Richard Scurrell: I would estimate the piracy insurance to be worth approximately $100 million to the insurance market, and that’s just new premium to the market within the last two years.

None of the insurers Marketplace contacted agreed to comment. Nor did any shipping companies. As with the pirates themselves, a veil of secrecy covers much of the industry set up to deal with piracy. That may be because it’s come under increasing pressure to stop paying ransoms, which many say only perpetuates the problem. And recent media reports have suggested that London industry may have a vested interest in seeing those payments continue.

Stephen Askins disagrees.

Askins: Yes, it’s expensive. Yes, clearly people make money out of dealing with these things. But I don’t think that any of us though are seeking to exploit the situation.

The Obama Administration is pushing for measures in the United Nations that would make it harder to pay ransoms. It’s concerned that money is ending up with terrorist groups in Somalia. But Askins says with hundreds of seafarers currently held captive at any one time, that could put those lives at risk.

Askins: The genie has long since left the bottle. Ransoms have to be paid.

Paying a ransom is legal in the U.K., another reason many are negotiated here. And the U.K.’s shipping industry is lobbying to keep it that way. The British government has placed an indefinite hold on the measures in the U.N. In an e-mailed statement, the U.K.’s foreign office said it was taking time to review the legal implications of those measures.

In London, I’m Christopher Werth for Marketplace.

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