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Chubb Group of Insurance Companies: Disputes Over Who Pays Ransoms Put Crew Members at Risk

^{Published on 2009-03-10 09:20:26, Last Modified on 2009-03-10 09:21:10 - Market Wire}
 

SEOUL, KOREA--(Marketwire - March 10, 2009) - As pirates increasingly target cargo vessels in the Gulf of Aden, owners are struggling to pay escalating ransom demands -- putting their crews at risk, an insurance executive told nearly 100 Korean ship owners and insurance brokers meeting here.

Jonathan Doherty, North Asia regional manager for the Chubb Group of Insurance Companies, noted that each year an average of 500 Korean ships pass through the Gulf of Aden, currently one of the most dangerous regions for piracy. In 2008, 111 ships, including Korean-owned or manned cargo vessels, were attacked by pirates in the Gulf of Aden, a 200% increase over 2007. Forty-two of those ships were held for ransom, and 889 crew members were taken hostage. Most ransom demands were between $1 million and $4 million per ship.

"Vessel owners may assume that their hull or cargo insurance policy will pay the exorbitant ransoms that pirates demand," said Gregory Bangs, worldwide crime, kidnap and ransom manager for Chubb. "Unfortunately, typical marine products do not fully contemplate and, therefore, may not fully respond to these types of piracy exposures. In addition, the hull policy often excludes 'acts of terrorism,' and courts still have not clearly defined whether pirates are terrorists. This can leave a crew that has been taken hostage at risk, while all parties -- insurance companies, vessel owners and cargo owners -- determine who will pay what for the ransom."

Kidnap, ransom and extortion insurance, subject to policy limits, terms and conditions, reimburses the policyholder for the pirate's ransom and extortion demands and pays for hostage/ransom negotiation expenses. The insurance policy also responds to the costs of legal defense, public relations, interest on loans taken out to cover ransom demands, security guards, travel and accommodations for insured persons, medical and psychiatric services, and rewards leading to the safe release of kidnap victims.

"It will take a great deal of teamwork to stop piracy at sea, and many countries are working together to do just that," said Bangs. "But, for now, vessel owners should consider the best ways to help protect their crew and property from a piracy event -- including the type of insurance protection they select."

The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property and casualty insurance for personal and commercial customers worldwide through 8,500 independent agents and brokers. Chubb's global network includes branches and affiliates throughout North America, Europe, Latin America, Asia and Australia.