Revision of High Risk Area
On the 10th December 2015 the Joint War Committee in London decided for the revision and reduction of the Hull War, Piracy Terrorism and Related Perils Listed Area, hereinafter referred to as the HRA.
The revision for the HRA was proposed by BIMCO and its co-sponsors following the effective counter piracy measures implemented with the introduction of Best Maritime Practices 4 (BMP4) which introduced the use of anti-piracy patrols by naval assets, use of armed guards on board vessels and the use of intelligence gathered by MSCHOA, UKMTO and ICC respectively.
Such measures were the decisive blow in deterring and combating pirate attacks against ships transiting through the HRA which is backed by the decline in 2012 up until 2014 which was the last confirmed attack on a ship as seen by the figures in the below table.
IMB Statistics provide the following data on attacks carried out by Somali pirates:
|Attacks||Hijackings||Crew Taken Hostage||Crew Deaths|
Based on the abovementioned figures and also the pressure to reduce operating costs for shipping companies the revision of the HRA was only imminent.
The High Risk Area is now defined as being bounded by:
In the Red Sea: Latitude 15oN
In the Gulf of Oman: Latitude 22o
N Eastern limit: Longitude 065oE
Southern limit: Latitude 5oS
Benefits for shipping companies
Most significant benefit for shipping companies will be the significant reduction in terms of their insurance costs especially for Hull War Risk insurance premiums whilst transiting through the new HRA.
Such policy covers damage or loss attributed to acts of war, invasion, insurrection and other interventions by foreign state power or piracy but specifically excludes coverages from hazardous regions within the HRA or listed areas as provided by JWLA/022 (Link to site: http://www.google.com.cy/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0ahUKEwjRspXf4ZfMAhUDnBoKHTlvD4oQFggeMAE&url=http%3A%2F%2Fwww.lmalloyds.com%2FAsiCommon%2FControls%2FBSA%2FDownloader.aspx%3FiDocumentStorageKey%3D001f4a07-7dde-46fb-9c16-770a419a2d0b%26iFileTypeCode%3DPDF%26iFileName%3DJWLA022&usg=AFQjCNGAUjjOml62ruMOW11Q4eeZ2oy0QA
Should the operator wish to maintain coverage he ought to have informed the underwriter in advance of the passage and payed the War Risk Added Premium (WRAP). The reduction means that fewer ships will require WRAP and those that do require it will be for less days which corresponds to less money payable to the underwriters.
A significant benefit is now witnessed with tankers transiting from the Persian Gulf to the western coast of India or East Asia which has been removed from the HRA thus increasing profits for their operators.
Disadvantages for Private Maritime Security Companies (PMSCs)
Without any doubt the PMSC industry will be affected most of all as not only this is an over supplied market, the reduction of the HRA will equate to less transits needing armed guards on board ships.
Also the high cost both on a financial and logistical aspect coupled with the fact that embarkation and disembarkation opportunities are significantly further away from the revised HRA entry points this means that security guards will be travelling for significantly more days before their services are needed.
For example following the embarkation of a team from Suez they will have to transit all the way down to Djibouti until they reach the new HRA which is approximately 2-3 days of transit. Also the same applies for a team embarking from Galle until they reach the revised HRA as the opportunities to embark or disembark in the Indian Ocean exist at the entry and exit points of the ocean.
This will drive shipping clients to push fees for the PMSCs even lower.
What is everyone’s main concern is that the reduction of the HRA might have negative consequences and we might be witnessing a new era of piracy.
Also a huge concern is that PMSCs might turn to more cost effective solutions when it comes to the guards they employ in order to make up for their costs which could potentially mean low quality services and inability to deter a pirate attack when faced with one.
Only time will tell what is about to unfold in the next couple of months.