Most ransom demands are between $1m and $4m per ship, says Chubb

As pirates increasingly target cargo vessels in the Gulf of Aden, owners are struggling to pay escalating ransom demands—putting their crews at risk, Chubb told a conference of Korean ship owners.

Jonathan Doherty, north Asia regional manager for Chubb, noted that each year on average 500 Korean ships pass through the Gulf of Aden, currently one of the most dangerous regions for piracy.

In 2008, 111 ships, including Korean-owned or manned cargo vessels, were attacked by pirates in the Gulf of Aden, a 200% increase over 2007. Forty-two of those ships were held for ransom, and 889 crew members were taken hostage. Most ransom demands were between $1m and $4m per ship.

Gregory Bangs, worldwide crime, kidnap and ransom manager for Chubb, said: ‘Typical marine products do not fully contemplate and, therefore, may not fully respond to these types of piracy exposures. In addition, the hull policy often excludes ‘acts of terrorism,’ and courts still have not clearly defined whether pirates are terrorists. This can leave a crew that has been taken hostage at risk, while all parties—insurance companies, vessel owners and cargo owners—determine who will pay what for the ransom.”

Kidnap, ransom and extortion insurance, subject to policy limits, terms and conditions, reimburses the policyholder for the pirate’s ransom and extortion demands and pays for hostage/ransom negotiation expenses. The policies also cover the rewards leading to the safe release of kidnap victims.