Protection against piracy

Transcription

1 AUGUST A report 2009 on piracy and the insurance market Protection against piracy AUGUST 2009 Foreword Pirates have been around for as long as people have used the sea as trade routes. The earliest documented cases date back as far as the 13th century BC when the Sea People threatened the Aegean and the Mediterranean. 1 Introduction According to the IMB 2006 Annual Report there are a number of global piracy hot spots including Indonesia, Nigeria, Somalia, and the ports of Chittagong in Bangladesh and Santos in Brazil. See figure 1. The recent events in one of the world s busiest shipping channels off the coast of Somalia through the Suez Canal and the Gulf of Aden, illustrates that the ancient risk of seaborne piracy against transport vessels continues to be a significant concern for international trade today, albeit with a new focus. The total cost of piracy on the global economy has been estimated to be between US$13 and US$16 billion each year. 2 This report has been developed as a follow up to the report released by Allianz Global Corporate & Speciality (AGC&S), Piracy: An ancient risk with modern faces. We have developed this report in response to frequently asked questions by brokers about how marine insurance policies respond to piracy. The report can be of particular use to brokers when discussing with their clients the exposure piracy might create for their business and what protection marine insurance policies may offer. We are pleased to share this report with you as a useful reference tool and to offer some technical information on some of the salient clauses in the standard marine insurance wordings in use that could apply to acts of piracy. Ron Johnson Regional manager - Marine Allianz Global Corporate & Specialty - Pacific nderforprint=1 Figure 1. Google map highlighting the global piracy hotspots. While the reported incidents of piracy in some of these hot spots have subsided since 2006, the critical trade corridor of the Gulf of Aden, that links the Suez Canal and the Indian Ocean, has seen an alarming increase in incidents of piracy. This trade corridor is noted as one of the busiest shipping channels in the world carrying the bulk of trade between Europe and Asia. The NATO Shipping Centre noted an alarming increase in piratical activity in this region during 2008, which was maintained to the end of the year. In comparison to 2007, incidents of piracy and armed robbery at sea in 2008 trebled in the Gulf of Aden. The International Chamber of Commerce s International Maritime Bureau (IMB), reported a worldwide increase of 11 per cent in the number of incidents of piracy or armed robbery at sea against ships during Allianz Australia 1

2 Of the 293 incidents the IMB recorded for the year, 111 occurred off the coast of Somalia. 3 During AUGUST 2008, a 2009 total of 815 crew members were taken hostage from vessels hijacked in the Gulf of Aden and off the east coast of Somalia. The total number of hostages taken in these regions during 2009 already stands at has to date seen an increase in incidents of piracy. During the first quarter of 2009, there have been almost daily reports of pirate attacks or attempted boarding of ships. As the AGCS Global Head of Marine Hull, Sven Gerhard noted in his article Piracy On The High Seas, published in the 2009 AGCS Global Risk Dialogue, the frequency of piracy has historically increased during times of economic downturns or political unrest. During the meltdown of the Asian economies during the 1990s, the area suffered consecutive years of an increase in the frequency of piracy incidents until the year The reported incidents of piracy in Asia reduced during the subsequent boom years for most of these Asian economies. The IMB reported some 64 of these emanated out of the Gulf of Aden alone, where 19 ships were captured. The global media s attention was drawn to piracy in April 2009 following the hijacking of the Maersk Alabama carrying a load of emergency relief aid from the US, destined for Kenya. Subsequent action by US forces in the rescue operations to resolve the stand-off raised the stakes, with Bloomberg reporting in April that Somali pirates were threatening to target US interests to avenge the deaths of colleagues. Bloomberg also reported that there was speculation that the US military was even considering attacks on pirate bases on land, as well as aid for the Somali people in an effort to curb ship hijackings. Any actions of this nature would have a significant bearing on marine insurance policies as it would bring into play a number of other clauses and wordings such as war, riots and terrorism. Nigeria recorded the next highest incidence of piracy in 2008 and has shown similar trends in early See figure 2. Gulf of Aden Tanzania Indonesia Nigeria Somalia Vietnam Bangladesh Figure 2. Seven locations accounted for more than two thirds of 293 reported pirate attacks in Modern piracy can also take place in conditions of political unrest. For example, following the US withdrawal from Vietnam, Thai piracy was aimed at the many Vietnamese who took to boats to escape. Further, following the disintegration of the government of Somalia, warlords in the region have attacked ships delivering UN food aid. 5 With the current economic conditions, we can expect to see piracy on the increase in other parts of the world previously considered to be safe. In this period of heightened risk, cargo interests should understand how their marine insurance policies respond to such events. How do marine insurance policies respond to acts of piracy? Piracy is one of the original perils covered by most traditional marine insurance policies. The operative clause of the Standard Marine Companies Combined Policy wording issued by the Institute of London Underwriters (The Institute) from the eighteenth century, specifically noted piracy as an insured peril as did Schedule Two of the Australian Marine Insurance Act Adoption of the wider all risks clauses in modern times has negated the need to specifically note piracy as an insured peril, but it still survives to this day in some of the older specified perils Institute Clauses that continue in common use, such as Institute Time Clauses Hulls (Clause 6.1.5) and Institute Time Clauses Hulls Port Risks (Clause 4.1.5) Care needs to be taken when cover for some reason is limited to one of the more restricted perils wordings where piracy is not one of the nominated insured perils Allianz Australia 2

3 AUGUST 2009 For example, cover in most marine cargo insurance polices for non-containerised cargo carried on deck may revert to one of the restricted perils wordings such as Institute Cargo Clauses (B) or (C). In such incidences, these policies will not respond to piracy. Some other matters that need to be considered when commenting on how marine insurance policies respond to piracy are: The basic indemnity provided under Institute Clauses is one of physical loss or damage to the interest insured caused by an insured peril. While loss or damage arising from acts of piracy may be covered under conventional all risk style clauses, the clauses themselves may not necessarily respond to pure ransom payments; Most Institute Clauses include protection for general average and salvage charges adjusted or determined in accordance with governing law and practice if it were to be declared by shipowners; Any loss or damage through delay, even caused by an insured peril, is a specific exclusion in all Institute Clauses; and Standard Institute Clauses also contain exclusions in respect of war, capture, seizure arrest or detainment other than due to piracy, riots and strikes, and terrorism that may apply to the event. The crucial factors arising out of this for hull and cargo interests are to understand: What coverage is provided in their specific marine insurance policy for acts of piracy?; and Is it actually an act of piracy or something else that may be excluded by the policy? What is an act of Piracy? The IMB defines maritime piracy as the act of boarding any vessel with the intent to commit theft or any other crime, and with an intent or capacity to use force in furtherance of that act. 6 Piracy consists of any of the following acts: (a) any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed: on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft; against a ship, aircraft, persons or property in a place outside the jurisdiction of any State; (b) any act of voluntary participation in the operation of a ship or of an aircraft with knowledge of facts making it a pirate ship or aircraft; (c) any act of inciting or of intentionally facilitating an act described in subparagraph (a) or (b) 7. In the broader sense, piracy is not necessarily limited to events that take place on the high seas. As noted in the Second Schedule of the Marine Insurance Act 1909, acts by persons ashore can amount to piracy and pirates through the ages have plundered stores and ammunition at ports. Piracy is of note in International Law. Those committing thefts on the high seas, inhibiting trade and endangering maritime communication are considered by sovereign states to be hostis humani generis (enemies of humanity). 8 There have been a number of international efforts to address the growing piracy issue 9 but considerable Part VII Article 101 United Nations Convention on the Law of the Sea Allianz Australia 3

4 challenges still remain, particularly in the areas of enforcement against those responsible for pirate attacks. AUGUST 2009 From a marine insurance perspective, pirates have traditionally focused on plundering the ship s cargo, the contents of its safe and personal possessions of crew and passengers onboard, which generally falls within the scope of most all risks style cargo insurance policies. Containerisation has made the task of identifying and pilfering high valued cargo far more difficult, forcing the pirates to shift their focus from cargo to hijacking the ship and holding it, the passengers and crew for ransom. What is an act of war? was an act of piracy or an act of war or in some cases perhaps even an act of terrorism. Some examples include: Members of the Irish Republican Army (IRA) hijacking and sinking English coastal trading vessels during the early part of the 1980s; The hijacking of the cruise ship Achille Lauro in 1985 by armed members of the Palestine Liberation Army (PLO) demanding release of PLO operatives imprisoned by Israel; A failed attack against the visiting US warship USS The Sullivan in Yemen in early 2000 followed by the successful attack on the USS Cole later in October 2000; and In 2008, Israeli warships intercepted and seized a Libyan ship carrying humanitarian aid to Gaza, justifying it on security grounds. Libya accused Israel of an act of piracy. The definition of war is a fluid concept and has changed in customary international law. Until 1945, an act of war in the traditional, historical sense was understood to mean any act by a State that would effectively terminate the normal international law of peacetime and activate the international law of war. The decision was invariably that of the target State and was generally preceded by a statement warning that certain acts would be considered acts of war and would trigger hostilities. Belligerent and neutral States also used the term. Belligerents would interpret as acts of war any action that seemed to assist the enemy; neutrals, any infringement of their neutrality. In 1945, the United Nations Charter banned the first use of force, putting an end to declarations of war. Article 2(4) of the Charter states: All members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any State." In the domestic law of many States, act of war is also used in some contexts, such as insurance and reparations claims, to refer to any use of force in any armed conflict. The term act of war is committed by a sovereign State, however should be viewed now, as primarily rhetorical in nature. The term act of aggression has to all intents and purposes subsumed the legal term act of war and made it irrelevant, although act of war is still used rhetorically by States that feel threatened. 10 During the last few decades there were a number of incidents that raised the question of whether an event Clearly the attacks on the US naval vessels were not acts of piracy, but even the earlier events could possibly be viewed as acts by or against a belligerent power that would bring into play war exclusions in standard Institute Clauses. While war is a standard exclusion in all Institute Clauses, unless full scale war has been declared or there is an increased risk of specific countries becoming involved in a war, underwriters may reinstate cover through the inclusion of separate War Clauses. There will be circumstances that may be reported as acts of piracy that actually will fall within the scope of War Clauses and the Insured s focus will be on how these clauses respond to the particular event. For insurance purposes why is it necessary to distinguish between acts of piracy and acts of war? The significant difference between war and piracy for marine cargo insurance purposes is the attachment and cessation point of cover in the standard duration/transit sections of Institute Clauses. Standard Institute Cargo Clauses effectively grant an element of land-based coverage by including the words continues during the ordinary course of transit (Clause 8.1 of ICC (A) 1/1/82). Therefore, all risk style Institute Clauses will respond to acts of piracy whether or not they occur on the water, but exclude war losses in total. If War Clauses were added to the marine policy, cover would be reinstated, but effectively only whilst on the overseas vessel due to the impact of the attachment and cessation clauses of the Duration/Transit sections (ref Clause & of War Clauses 1/1/82). 10 Act of War, Turner, D Allianz Australia 4

5 The Insured should look at where the event took place and then to look whether the war exclusion may apply to the specific event. AUGUST 2009 Each event will in turn be determined by the facts of the specific case in question. Other marine insurance matters that need to be considered There are other events or matters that may have an impact on indemnity for a client s marine insurance policy, some of which include: What happens if the voyage is terminated due to an act of war and my client s cargo is discharged at an unintended foreign port? Coverage under Cargo War Clauses ceases fifteen days after discharge where the contract of voyage is terminated at a port other than the original destination (ref Clause 5.2 of War Clauses 1/1/82). Cargo interests would need to seek some form of static property insurance on the goods in such instances. If the Interest Insured is later reshipped to its original destination or another destination, cover would only reattach where prior notice was given to underwriters and terms agreed, and then only after the interest was loaded onboard the on-carrying vessel for the new voyage (ref Clause 5.2 of war Clauses 1/1/82). What happens if the ship or cargo is captured, seized, arrested or detained as an act of War? Can the Insured claim for loss of the Interest when it is unable to gain access to it even though the Interest is known not have been damaged or destroyed? There is also a specific exclusion in respect of delay that would need to be taken into consideration before commenting on the measure of indemnity afforded by specific clauses, especially in respect of perishables and other time-sensitive goods. In some cases, consideration will be given to some of the more specific exclusions for certain events that may come into play if the event is technically something other than an act of piracy. However, standard Institute Clauses contain specific exclusions with regard to war, capture, seizure, arrest or detainment other than piracy, riots or strikes, and terrorism. These need to be carefully examined before it is possible to comment on whether the event in question would fall within the coverage of the specific Institute Clauses. War Clauses 1/1/82 provide protection for capture, seizure, arrest, restraint or detainment arising from war providing a notice of cancellation has not earlier been provided by underwriters, but this is in respect of physical loss or damage to the interest insured (ref Clause 1.1). The issue of deprivation of possession of goods as distinct from loss or damage has been developed through a constructive total loss concept and has been codified in Australia under the Constructive Total Loss provisions of Section 66 of the Marine Insurance Act The Marine Insurance Act provides for circumstances where an Insured can claim for a constructive total loss of interests even though it has not been determined whether there has been any loss or damage to interests. Insured should familiarise themselves with the requirements of the Marine Insurance Act. What happens if the ship or cargo is captured, seized, arrested or detained by an authority that is not considered an act of piracy or war? Lawful seizure or arrest will not give rise to a claim under marine insurance policies. Lawful seizure, arrest or detention (other than war and piracy) is specifically Allianz Australia 5

6 excluded by marine clauses on the basis that these cases should be dealt with in international courts rather than under insurance policies (ref Clause 6.2 of ICC (A) AUGUST 1/1/82) Examples may be shipments to countries in direct contravention of UN sanctions. Policyholders also need to be aware that the Termination of Transit Terrorism Clause JC056 may also have an impact in cases where storage other than in the ordinary course of transit is utilised for inland delivery of goods. The voyage must also be a lawful maritime adventure for marine insurance contracts to be enforceable. This is one of the basic tenements of all commercial contracts and codified in Marine Insurance Act There have also been reported cases where it is not clear whether there has actually been an arrest or detention of a vessel. Many people may remember the case of the Norwegian cargo ship the MV Tampa that rescued asylum seekers only to find itself stranded and unable to enter Australian ports. Australian armed forces boarded the vessel and much was written about the technicalities of whether it was actually in detention or free to put to sea. Ultimately, the matter was resolved and the vessel completed its voyage, but not before a considerable delay that raised a number of questions regarding jettison and pillage of cargo and the effect of the delay on time-sensitive goods like perishables and foodstuffs. What happens if the act is carried out by a group who is politically or religiously inspired? Institute Clauses excluded loss or damage to interests by terrorists or persons acting from a political motive long before it became such a hot issue in property insurance following the events of 9/11 (ref Clause 7.3 of ICC (A) 1/1/82). Cover was generally reinstated through the inclusion of Strikes Clauses that includes comparable words about terrorists (ref Clause 1.2 of Institute Strikes Clauses 1/182). The words used in the exclusion and subsequent reinstatement have often been criticised as being too vague and difficult to interpret. The new 2009 Institute Clauses have been modified to provide more prescriptive words on what would be deemed an act of terrorism by referring to it as "persons acting on behalf of an organisation seeking to influence or overthrow any government and acting from a political, ideological or religious motive (ref Clause 7.3 & 7.4 of ICC (A) 1/1/09 and 1.2 & 1.3 of Institute Strikes Clauses 1/1/09). Retaliatory actions threatened against US and French interests following events in 2009 may very well raise the question of whether the terrorism exclusions may apply in the light of these new clauses to some future events. Clause 2 of this wording specifically notes cover for terrorist, religious or political acts as defined only reattaches flowing on from storage. This clause could have a significant impact on clients who source from overseas to a warehouse/logistics store for further sorting and distribution. What happens if the so called pirates are hijacking the Interests to extort a ransom? Historically, most acts of piracy have involved capture or seizure of ships to plunder the cargo and treasure on board. Sometimes the ships were re-flagged and/or named as pirate vessels but more often than not, the captured ship would be sunk or burnt after it was relieved of its treasure to avoid detection. There have been reported cases of piracy involving the capture and holding for ransom of crew or international dignitaries on board ships, but these have been relatively rare in practice. As noted by the AGCS Marine Hull Underwriter, Daniel McCarthy, in his article in the AGCS publication Piracy: An ancient risk with modern faces, the more recent cases in the Gulf of Aden have almost all involved the hijacking of the ship to extort a ransom. Cargo and ship interests may need to understand where they stand in respect of indemnity under their marine insurance while being held by hijackers. While marine policies may respond to loss or damage to Interests due to piracy, they will not necessarily respond to any ransom payments made to release the ship and/or its crew and/or its cargo. The owners of the interests or the shipowners may be left to fend for themselves. 11 In these circumstances, shipowners may be inclined to declare what is known as General Average and seek contributions from cargo interests towards the cost of any ransoms to release cargo. This topic is dealt with separately below. While the ship is anchored or adrift, cover would continue in accordance with the standard Transit (Duration) Clause of Cargo Clauses unless the cargo is discharged overside or the vessel has reached its final destination and 60 days has elapsed (ref Clause 8 of ICC (A) 1/1/82). 11 Piracy on the High Seas, Global Risk Dialogue, Allianz Global and Specialty Allianz Australia 6

7 Cargo pilfered, consumed, damaged, jettisoned or otherwise destroyed during this time would normally be dealt with under standard Cargo Clauses as an act of piracy, AUGUST but it is 2009 also important to consider the implications of the War, Strikes/Terrorism exclusions previously touched on and the specific Institute Clauses applicable to the policy. Any losses due to short non-delivery of cargo will also need to have clear documentary evidence that the loss occurred during the ordinary course of transit (quantities loaded/out-turn, etc). Thus, where a ship is detained for whatever reason, cargo interests would be well advised to start collating information to avoid delays in claims settlements. What do cargo owners do if the vessel owners are not responsive to hijackers demand for a ransom? Ship values have reduced considerably in the current global economic conditions with cases quoted of some older cargo ship values dropping to as little as US$1m from US$10m in the previous year (ref Forbes report 29/12/2008 Shipping Bust Succeeds A Big Boom). In the light of this, it is not hard to envisage that the hijackers demands, which are often in excess of US$2m, may actually exceed the value of the conveying ship. While armed storming of detained vessels has not been one of the resolutions utilised by shipowners to date, it cannot be ruled out entirely going forward. Use of US forces to gain the release of the Captain of the Maersk Alabama referred to above is an example of how things are escalating rapidly and could easily get out of control where it involves ships/crew/cargo from some of the less politically stable regions of the world. While the problems in the Gulf of Aden have been well known to international trade for some time, the global media s attention to the piracy problems in the area was to a large extent first alerted when pirates hijacked the MV Faina in September The ship was Ukrainian owned and involved a shipment of arms including tanks and heavy weapons headed for Somalia s neighbour, Kenya. It was hijacked by pirates who diverted the ship into an area off Somalia controlled by the Islamic Courts Union (ICU) where it anchored. While the release of the vessel was eventually negotiated peacefully in February 2009, it is an example of where cargo interests may be caught up in conflicts between warring parties. Cargo policies including War & Strikes Clauses responds to damage caused during an armed storming of the vessel providing the Cargo interests have exercised due diligence and notice of cancellation had not been provided by underwriters. In such cases, the shipowners may have little desire to actively pursue release of the vessel, particularly if there is the prospect of claiming a constructive total loss under a marine insurance policy. Cargo owners would be at risk if the shipowners chose not to engage in negotiations for the release of the vessel, or simply ignore them totally as they would have no cover for mere ransom payments under standard Institute Cargo Clauses. At this juncture, some specialist markets are evolving to provide cover for the cost of specialists to negotiate release of interests and indemnity for ransom demands. Brokers should engage Insureds on the availability and cost of such cover during this period of economic uncertainty and when there has been an increasing trend in hijackings. What happens if the shipowners engage the resources of armed contractors/mercenaries to storm the vessel resulting in damage to the t ship and/or its cargo? Is there a chance that the shipowners could declare General Average? General Average can best be described as an international agreement whereby all interests in a voyage agree to contribute toward expenditure or sacrifices made for the common good and safety of the voyage in a time of peril. It is codified in what is known as the York-Antwerp Rules which set out the circumstances where General Average may be declared and how it will be adjusted. The four essential requirements to invoke a General Average loss are: there must be a common peril; there must be an intentional or voluntary act; the act must be for the common safety; and the act must be reasonably made and result in sacrifice or expenditure (ref Notes on General Average for Master and Ships Agents by J. S. Crump of Richards, Hogg International) Allianz Australia 7

8 One of the possible avenues available to shipowners to obtain contributions from cargo interests for the costs associated with negotiating release of the vessel may be to seek AUGUST to declare 2009 General Average. This can be difficult to apply and is not specifically designed to address ransom threats. 13 If the Master was forced to take some form of drastic action like intentionally grounding the vessel if it ran out of fuel, that would give rise to a General Average loss, but the difficult and drawn out process leaves this as a less favourable option. to remember that War and Strikes/Terrorism Clauses could also apply depending upon the circumstances of the specific case. Significantly, Strikes Clauses for Frozen Food/Frozen Meat contain a specific exclusion in relation to absence, shortage or withholding of equipment power, fuel, coolant, refrigerant or labour, which may need to be considered (Clause 3.7 of Institute Strikes Clauses (Frozen Food) 1/1/86). Cargo interests would be wise to seek clarification from their broker or underwriter on the application of specific clauses in their marine policies. Businesses with shipping interests navigating these volatile areas of the world should be well advised to consult with their broker on alternative solutions such as Kidnap & Ransom coverage, which are developing in response to this growing threat. For those hull and cargo interests holding marine insurance, the matter would be of little concern as standard Institute Clauses include contributions toward General Average and Salvage Charges as part of their standard indemnity. Will Cargo policies respond to delay? Losses caused by delay (e.g. consequential loss, loss of market) are specifically excluded under standard Institute Clauses, even if the delay results from an insured peril (ref Clause 4.5 of ICC (A) 1/1/82). There is no known or emerging market for losses caused by delay at this point in time. If cargo interests are shipping their goods through high-risk areas and have time-sensitive products, they would be wise to consult their broker and/or underwriter on what cover, if any, may be available for delay. What about deterioration caused by power being turned off or intentionally disconnected to refrigerated containers? Deterioration of perishable cargo is a complex situation and indemnity will depend heavily on the particular Institute Clauses applying to the policy as well as the circumstances surrounding the specific event. One issue to consider is that most standard Institute Clauses applicable to frozen or refrigerated goods only provide cover for deterioration that is caused by variation in temperature due to breakdown in refrigerating machinery that results in its stoppage for a designated period of time (ref Clause 1.2 of Frozen Food Clauses (A) 1/1/86). Although the range of perils that is provided may be extended by the Frozen Food Extension Clauses 1/1/86 or its equivalent for other commodities, it is important What sort of actions can policyholders expect from the marine insurance industry to this increased risk of piracy? Some underwriters in the UK have already begun a transition from covering piracy under hull policies to covering the peril under war risk policies. 14 The transition to war risk coverage of piracy risks could be helpful for insurers and policyholders alike because it would clarify ambiguity about how piracy is covered. The change comes as piracy has grown to unprecedented levels. Will this have any effect on the Australian Market? What can Australian an brokers expect? Marine insurers in the Asia Pacific region tend to be heavily reliant on reinsurance support from the London market so it is reasonable to assume the local market will follow suit as insurers treaty reinsurance programs are renewed. In the Hull Market - Hull underwriters of risks with global trading capacity have commenced excluding piracy as an insured peril and offer a reinstatement of cover by negotiation at a price under a War policy. The effect of the War Clauses is that cover for certain countries and regions may be excluded entirely or will command a much higher premium. The standard Institute Notice of Cancellation and War Automatic Termination of Cover Clauses Hulls Etc 1/10/83 also contains an option for underwriters to provide notice of cancellation for destinations and regions that are an area of heightened risk. This will mean that intermediaries placing hull accounts with global trading capabilities will need to keep abreast of risk changes ensure their clients are kept informed of any changes. In the Cargo Market - Because cargo has not been the prime focus of the recent spate of pirate attacks, they have had minimal impact on cargo losses. Therefore, 13 Allianz Global Piracy An ancient risk with modern faces 14 Allianz Australia 8

9 while the cargo market is closely monitoring the situation, there has been no push at this stage to follow Hull AUGUST underwriters 2009 in excluding piracy and adding it back through a War cover. The situation in respect of Project Cargo, including Delayed Start Up cover (DSU), may be somewhat different. Underwriters will require far more details on shipping routes for critical components for a project and become far more apprehensive about DSU risks where the critical items are being shipped through high risk piracy zones. Conclusion This report outlines the current threat to shipping from piracy and clarifies the difference between an act of piracy and war. For brokers, it contains a comprehensive presentation of the consideration of the measures which the insured should understand to avert modern piracy and combat it more effectively, while providing some direction on how marine insurance policies may respond. Pirates operating in the Gulf of Aden have shown they have the capabilities to adapt quickly. In response to the increased international naval presence in the region, they have broadened their targets to include smaller vessels and moved further out to sea through the use of mother ships. Cargo interests shipping through troubled regions would be wise to monitor the situation to prevent being locked into supply contracts they are unable to fulfil at the contracted price. Allianz manages risk from a broad perspective and will work with brokers to fit the cover to the needs of the client. This report sets out to raise awareness of the risks and inform brokers of some of the solutions available. For all enquiries ies please contact Ron Johnson - Regional Manager - Marine, Allianz Global Corporate and Specialty ron.johnson@allianz.com.au Disclaimer aimer: This report is provided as general information only and does not consider your specific objectives, situation or needs. You should not rely on the information in this report or disclose it or refer to it in any document. We accept no duty of care or liability to you or anyone else in respect of this report and we are not responsible to you or anyone else for any loss suffered in connection with the use of this report or any of its content. Businesses should seek independent legal advice in respect of specific questions about any issues raised in this report. Allianz Australia Insurance Limited (Allianz) AFS Licence No / ABN Market Street Sydney NSW Allianz Australia 9