Monday, May 14, 2012

Insurance Company Funded Private Navy Preparing for Pirate Wars

Private Navy's to fight pirates are coming, and we are starting to see more details.
A private navy costing US$70 million (Dh257m) is being set up to escort merchant ships through the pirate-infested Gulf of Aden.

It will comprise a fleet of 18 ships, based in Djibouti, and will offer to convoy merchant vessels along the Internationally Recognised Transit Corridor (IRTC).

This is the world's most dangerous shipping lane, between the Red Sea and the Arabian Sea. The fleet will be operated by the Convoy Escort Programme (CEP), a British company launched by the international shipping insurers Jardine Lloyd Thompson (JLT) and the Lloyds of London underwriters Ascot.

Full funding will be in place by the end of next month, and the CEP hopes the fleet will be operational by December.

"The shipping industry needs to stand up and be counted," said Angus Campbell, the CEP's chief executive and a former director of Overseas Shipholding Group, the world's second-biggest listed oil tanker company. "The time is now, not in four or five years' time."

Piracy in the region is costing the global economy an estimated US$7 billion a year. For the ship owners alone, every vessel sailing through the waters off Somalia is charged additional insurance premiums of between $50,000 and $80,000.

Ships opting to carry their own armed guards can be charged an additional $18,000 and $60,000 per voyage by security companies.

Although the European Union is spending more than €8m (Dh37.94m) a year to maintain a naval force in the waters - EU NavFor - its warships still cannot provide close support to all merchant vessels.

The CEP, however, offers substantial savings to owners as well as protection from pirate attack. The CEP will buy insurance and use that to cover the ships in its convoys, so owners will no longer need to pay premiums, or hire security.

Instead, they will just pay a flat $30,000 to $40,000 per ship in the convoy.
Read the rest here.

Note the ships of this private Navy will be conducting their mission Internationally Recognized Transit Corridor (IRTC). The thing is, very few pirate attacks and maybe as few as 2 total hijackings have taken place in the corridor over the past few years, so in some ways this is smoke and mirrors from the insurance industry, and a way for them to sustain the money grab but protect product at the same time.

This sets an interesting precedent in the 21st century. It is past time to start thinking about what the role of private Navy's will be during the next war at sea - because as this demonstrates, the need for private Navy's will always exist and during war time it's a safe bet they absolutely will exist.

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