Piracy and cargo theft in South East Asia

31 March 2017

While many would naturally associate the threat of piracy with the Gulf of Guinea and the Indian Ocean High Risk areas, it is actually South East Asia that sees the highest number of incidents.

The ICC International Maritime Bureau recorded 246 actual and attempted incidents of piracy and armed robbery on ships in 2015. Of those, 147 occurred in South East Asia, representing a 59.75% global share.

This is significant for an area that predominantly sits outside the Joint War Committee’s Listed High Risk Area, and represents a small increase on 2014. Although the Regional Cooperation Agreement on Combating Piracy (ReCAAP) records a 65% year-on-year decrease in the number of incidents for January to September 2016, the region remains an area of concern for piracy and armed robbery.

Of particular concern is the threat of armed robbery in conjunction with piracy. The hijacking of a vessel and kidnapping of the crew is often a pre-cursor to its cargo theft: a trend is characterised by recent incidents.

Case Study 1

In June 2016, the tug Ever Prosper and barge Ever Dignity were attacked near Sarawak, Malaysia. The attackers took all ten crew members hostage and tied them up, before stealing the crew’s valuables and the vessel’s cargo. All crew were reported safe with only one reporting an injury.

Case Study 2

On May 15 2015, a local product tanker was attacked by armed pirates while the vessel was passing near Sarawak, Malaysia. The pirates held the entire crew hostage, damaged the vessel’s communications equipment and hijacked the vessel, then proceeded to transfer the fuel oil cargo to another ship and steal the crew’s personal belongings. The crew were found safe.

What is noticeable about these case studies is the different modus operandi used in South East Asia compared to the rest of the world. The spate of hijacks/ kidnaps off East Africa between 2008 and 2012 were often characterised by lengthy kidnap periods and significant ransom payments, but not necessarily by cargo theft. In the Gulf of Guinea, cargo theft is a common issue, but is generally a secondary crime following the kidnap of crew, as evidenced by the spate of incidents in the Gulf of Guinea thus far in 2016.

In South East Asia, however, recent incidents are notable for the lack of kidnapped crew. The incident in May 2015 near Sarawak involved a clear intention to steal the fuel oil cargo, but no serious effort to kidnap and then ransom off the crew: a pattern which has been seen in other similar events over the last 18 months. It is therefore important for owners and charterers to have a robust and appropriate piracy kidnap and ransom (K&R) cover that covers all areas of the world in which they operate, even areas which sit outside the JWLA 022 High Risk area. A standard piracy policy excludes cargo theft, and must be built into cover separately.

Although not a standard covered peril, cargo theft can be built into cover and the piracy markets are responding to this specific issue. Lloyd’s syndicate has released a ‘South East Asia’ Threat product, which includes up to USD 1 million of fuel oil theft and up to USD 10 million for general cargo theft. In addition, the policies cover up to USD 100,000 of vessel damage cover, in order to protect the no claims bonus on marine policies.

Piracy incidents can also often be violent affairs, with 25 per cent of attacks resulting in threats and injuries to crew, and K&R piracy policies include personal accident cover of USD 250,000 per crew member, with a typical event aggregate of USD 1.25 million.

Given the specificity and range of associated risks in South East Asia, charterers and owners should try to ensure appropriate piracy and cargo coverage is in place to cover their crew and their assets.

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For further information, please contact George Potter, Account Handler on +44 20 7558 3571 or email george_potter@jltgroup.com