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Shipping insurance costs to fall on cut in piracy risk area

Staff writer |
The insurance costs for ship operators are likely to fall following the recent decision of a global shipping body to reduce the size of the area identified as high risk area, HRA, for Somalian piracy.

"All other things being equal, a reduced HRA should first and foremost reduce insurance cost for the operators as most other protective measures are advised to be upheld," Peter Sand, chief shipping analyst of the Baltic and International Maritime Council, or Bimco, said.

Last week, Bimco sent an advisory reducing the eastern limit of HRA from 78 degrees East to 65 degrees East and the southern limit from 10 degrees South to 5 degrees South.

Boundaries in the Red Sea and Gulf of Aden have been reduced to 15 degrees North and 22 deg north, respectively.

Bimco is the world's largest international shipping association, with more than 2,200 members and frequently revises the best management practices for protection against piracy around Somalia.

Once insurance costs are reduced, the market conditions will determine on how fast the benefits are passed on to the customers, Sand said.

This will definitely reflect in the freight rates on voyages to the west coast of India, said a dry bulk ship-broker based in the country.

Technically, the additional premium in freight for ships calling at ports on India's west coast should be done away with, said a dry bulk ship operator.

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