The hijacking of ships in the Indian Ocean has highlighted to the world at large that piracy remains a modern day scourge. During the first six months of this year at least 32 ships have been seized by pirates and that 19 are currently being held for ransom.

While the most high profile incidents are attributable to pirates from Somalia, ships have also been attacked recently in the Gulf of Guinea close to the west African coast, in the seas of south east Asia and off the northern coasts of South America. Pirates have demonstrated that they are increasingly prepared to use machine guns and RPGs to achieve their aims, escalating the threat to shipping and seafarers.

The activities of Somali pirates in particular has led to changes in the ways that the insurance industry responds to piracy. Marsh has closely monitored these developments and has prepared a white paper setting out the insurance implications of piracy that apply in July 2011.

The white paper looks at the following issues:

• insuring against loss of or damage to ships caused by pirates;
•  payment of a ransom to secure the release of a hijacked ship, cargo and crew;
• issues to consider relating to marine kidnap and ransom insurance;
• marine war risks and marine K&R insurance markets — a status report;
• loss of hire following piracy;
• the P&I position; and
• the use of armed security.