Press Center | Freight Shipping Logistics News
Ms Nancy Kirigithu, the director general of the Authority says though at the moment it is hard to quantify the impact of piracy on Kenya, short term insurance premiums are likely to rise for both ships and cargo due to increased risk.
These sentiments complement last month’s report by the Baltic and International Maritime Council (BIMCO), an independent international shipping association, that said exporters hiring ships using piracy-prone routes will incur additional insurance costs and pay for the days a vessel is detained by hijackers. Other costs relate to additional crew and preventive measures employed to reduce the risk of attacks.
Mr Ibrahim Owino, the marine operations manager for Express and Shipping Logistics (E.A) Ltd says that most companies have started to feel the squeeze as insurance costs have gone up, adding that prices for consumer products are likely to continue soaring due to the general increase in costs of transit.
“These days importing products from a country like India takes about two weeks what previously used to take four days. The ships are forced to use longer transit routes. This increase forces many companies to recover part of the costs by passing them on to consumers,” Mr Owino says.
Insurance experts say that large ships generally carry three separate types of insurance. Marine — or hull — insurance covers physical risks, such as grounding or damage from heavy seas.
A second type of policy, protection and indemnity, covers crew issues, while war risk insurance covers acts of war, insurgency, and terrorism.
Although war risk policies typically cover hijackings and piracy, insurers often charge extra for ships that venture into high risk areas such as the Gulf of Aden.
Lloyd’s of London insurer Beazley Group P.L.C says with an average insured loss of between $2 million (about Sh178 million) and $3 million (Sh237 million) per incident, the cost to insurers from piratical activity this year has increased to around the $100 million (about Sh7.9 billion) mark.
The insurer says the past six months has seen war cover for a typical Gulf transit—excluding piracy—rise to around 0.04 per cent of the value of a transit, up from about 0.01 per cent, with rates including piracy up to between 0.1 per cent and 0.25 per cent from 0.04 per cent.
The cost would ultimately be passed on from the ship owner to the charterer and so the cost of carriage of goods will inevitably increase.
Direct insurance costs for charterers using the Gulf of Aden have also increased over the past six months, with insurance rates to cover war loss of hire—whereby a charter can insure against the hire costs of a held vessel for up to 90 days—up to 1 per cent per call from 0.01 per cent.
Mr Issa Omari the chief executive of Investment Climate Facility for Africa says piracy is a major threat to the growth of region’s economy.
He says that governments need to tackle all barriers to doing business if they have to successfully establish themselves as secure and stable international trading partners.
“What this means is focusing on the fundamentals and building robust investment climates that will in turn, help create more formal and legitimate opportunities for wealth and job creation,” Mr Issa says.
Political and social problems in Somalia have been cited as the main cause of piracy.
“Restoring security and stability in Somalia is vital to the success of the reconciliation effort and survival of the unity government,” said UN Secretary-General Ban Ki-moon at a conference in Brussels.
The UN estimates that Somalia needs about $250 million to tackle threats in the lawless country.
“It is only by improving the continent’s investment climates that Africa will see wider economic growth, job creation, improved prosperity and security that will reduce the incentives to participate in illegal and risky activities,” the ICF boss says.
With regards to trade in the East African region, ICF is currently working on a project with the East African Community with the end goal of reducing transit times for traders along the Northern and Central Corridors.
“These corridors are the life-blood of EAC partner states, especially for landlocked Uganda, Rwanda and Burundi, but passage along them can be severely hampered by delays at ports, on roads and at border posts. Our involvement underlines the importance of collaboration between neighbouring countries as a vital prerequisite for removing trade barriers,” Mr Issa adds.
There are also fears that some shipping lines may avoid the Gulf of Aden route altogether, preferring the longer Cape of Good Hope route. Such a move would delay ships and increase the cost of freight.
Ms Kirigithu says Kenya might lose out if some shipping lines decide to withdraw their vessels from service to the region but she says there is no any notice as to that effect so far.
Routing a tanker from Saudi Arabia to the United States through the Cape of Good Hope, for example, would add 2,700 miles (4,345 kilometers) to the voyage and boost annual fuel costs by about $3.5 million, according to the US Department of Transportation’s Maritime Administration.
Pirates can extort $1 million and more for each ship and crew. Kenya estimates the sea bandits raked in $150 million last year.
20 attacks were recorded off Somalia’s east coast with 18 of those in March alone, which included four hijackings, comparing with seven incidents in the fourth quarter of 2008.
The International Maritime Bureau (IMB) says 41 incidents were reported in the Gulf of Aden region and five vessels hijacked.
PARASTATAL heads who signed the Mombasa port community charter risk being sacked if their agencies do not deliver on the contents of the new entity. The charter signed between the government and the private sector aims at improving the movement of cargo from the port into hinterland