December 4, 2008
Aon launches piracy loss of earnings insurance
If your ship is hijacked, it's not going to be earning--and your business is certainly being interrupted. Enter Global risk and insurance firm Aon. In a statement in London today, it announced the launch of a new insurance policy for charterers, shipowners and cargo owners to cover loss of earnings from a ship being detained by pirates.
There have been over 50 reported attacks off the coast of Somalia, with 32 vessels hijacked, in the first eight months of 2008. The average duration of vessel seizure is 60 days, says Aon, which means that charterers have been incurring the cost of paying charter hire for these additional days without receiving any extra income. Cargo owners are also facing the risk of cancellation of contracts due to the delay.
Relevant hull and war clauses cover physical loss or damage arising from piracy, and ransom is either dealt with by specific coverage or by owners attempting to recover as a sue and labor expense. However, there has been a potential void in cover for the financial impact of business interruption, or loss of earnings.
This new policy is bridging the gap and is designed, for example, to cover:
- charterers, who are paying for hiring the vessel even though the vessel is detained;
- shipowners, who in the event of contract frustration, may lose out on charter revenues;
- cargo owners, particularly of seasonal goods, who face cancelled contracts if the goods are held up;
- all other interested parties to a venture with an insurable interest.
The cover is triggered from day one of the attack (with no deductible) and is a standalone policy to complement existing hull, war, cargo and P&I cover.
Peter Townsend, Aon's head of marine hull insurance, said: "The recent spate of pirate attacks in the Gulf of Aden/Horn of Africa has highlighted how shipowners and charterers are incurring significant uninsured costs with no recourse. We decided to do something about it across the marine industry so all parties affected by an attack could recover their loss of earnings."
Peter Dobbs, CEO of Aon's U.K. marine team, added: "This year has seen our marine clients facing a raft of risks as shipowners face tighter margins in the credit crunch and hull rates begin to increase. Against this backdrop, Aon has stepped up its innovation to provide our clients with solutions that respond to the real challenges facing their businesses - such as piracy attacks."
The piracy loss of earnings insurance is among a number of new products from Aon in 2008, which include protection for insurer insolvency and trade finance.