8/14/2019 Article on Pirates

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Dear (s)

Pirates for long were thought of an one eyed jacks, colorful vagabonds who would strike at will and capture mercantile boacarrying cargo.

The modern world still have them in large numbers as brazenly displayed by Somali pirates causing havoc in the Gulf Aden, one of the world's busiest shipping lanes, which connects Europe to Asia and the Middle East via the Suez Canal. Thehas been alarming increase in the attempted attacks, those averted and successful sea jacking. When a ship is attacked pirates, great effort is naturally focused on the human aspect of the problem. Often the contractual and technical issues avery much a secondary interest when faced with an initial emergency. Again, here when we read of Piracy we do not attathem to be as empowered by any State or authority but carried out by groups of individuals acting for personal gain, in whicase they are to be considered as pirates for marine insurance purposes.

A chemical vessel trying to employ water cannons to ward off the pirates from getting on board. The Liberian flagged 30000ton VLCC Sirius Star was a bounty for the pirates.

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This vessel which could dwarf aircraft carriers has 2,000,000 barrels capacity of crude oil when fully loaded. Upon capture othis vessel, pirates demanded US $ 25M ransom but reportedly settled for GBP 2 M which reportedly was air dropped byparachutes. A photo of the vessel Sirius Star is attached below.

Here are some of my thoughts on the aspect of loss or damage arising out of piracy and how they would be treated by thUnderwriters.

From the Insurers angle, am not sure of the losses suffered as though the vessels had been held captive, not much loss aresultant claim of cargo seems to have been reported. Many would consider piracy to be a war risk. Understand thNorwegian Marine does not make any distinction. The perils clause of the predominately used Institute hull clauses (198includes "Piracy". The intention is to embrace the likes of - violent acts of persons who board the vessel with an intention steal. Cover would include damage to or loss of the vessel. But when it comes to cargo coverage, we are most often guided

the Institute Cargo Clauses of ILU. Here is something extracted from the clauses that we, the Indian Insurers u

As it is, we have Clauses ICC A, B & C. whilst the first one is exclusion driven, rest are named peril policies. It is obviouthat piracy is not a named peril in B &C. The War exclusion under ICC A would read under: (emphasis added by me) 6 no case shall this insurance cover loss damage or expense caused by 6.1 war civil war revolution rebellion insurrection, civil strife arising there from, or any hostile act by or against a belligerent power 6.2 capture seizure arrest restraint detainment (piracy excepted), and the consequences thereof or any attempt thereat 6.3 derelict mines torpedoes bombs other derelict weapons of war.

Though the wordings are other wise similar in ICC B & ICC C exclusion, significantly, under 6.2 the words piracy exceptedmissing. As we all admit, this is an exclusion which can be covered on payment of additional premium and upon payment additional premium, Ins. War clauses would attach. The risk covered under this clause reproduces what is excluded under 6

ICC B & C and hence even when this cover is bought, there seemingly would be no coverage for the piracy related peri

Next, though there could be damages to cargo arising out of delay, this per se would not stand covered going by the specifexclusion contained in the Institute Cargo Clauses. Though I do not have firsthand information / confirmation on GA beindeclared by the ship that has been captured by the Pirates, there are some views floating that the ship owners could indestake claim for the ransom amounts paid.

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Initial thought would summarily dismiss it stating that ransom is not a legally accepted one and hence there would not be ancoverage. The question of legality may get a different interpretation if the captors are an overtly political or terrororganisation. There are also views that payment of ransom is not illegal under English Law after the repealing of 17Ransom Act. Going by the common principle of General Average entrenched that there would GA act when and only whany extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for tpurpose of preserving from peril the property involved in the common marine adventure, payment of ransom for release vessel might seem to be within the purview of the GA, as the loss is imminent, inevitable and actually mad

Thus to conclude, there is imminent and urgent need for the cargo owners - insured(s) to check whether their insuring term

do cover acts of piracy if the coverage were not on ICC A terms. As for ransom, though there are some instances of sucpayment, declaration of General Average appears not to have been practiced.

LOOK FORWARD TO YOUR VIEWS AND FEEDBACK ON THIS ARTICLE.

With regardsS SampathkumarRoyal SundaramHead of Commercial Claims - Automotive Vertical