Insurance firms plan private navy to take on Somali pirates

Patrol boats crewed by armed guards to protect valuable ships in Gulf of Aden

By Cahal Milmo, Chief Reporter - Tuesday, 28 September 2010

Insurers have drawn up plans for the world’s first private navy to try to turn the tide against Somali pirates who continue to plague the global shipping industry by hijacking vessels for ransoms of more than £100m a year, The Independent has learnt.

The new navy, which has the agreement in principle of several shipping groups and is being considered by the British Government, is the latest attempt to counter the increasingly sophisticated and aggressive piracy gangs who operate up to 1,200 miles from their bases in the Horn of Africa and are about to launch a new wave of seaborne attacks following the monsoon season.

A multi-national naval force, including an EU fleet currently commanded by a British officer, has dramatically reduced the number of assaults in the Gulf of Aden in recent months. But seizures continue with 16 ships and 354 sailors currently being held hostage. The Independent has seen Nato documents which show both ransom payments and the period that pirates are holding vessels have doubled in the last 12 months to an average $4m and 117 days respectively.

In response, a leading London insurer is pushing ahead with radical proposals to create a private fleet of about 20 patrol boats crewed by armed guards to bolster the international military presence off the Somali coast. They would act as escorts and fast-response vessels for shipping passing through the Suez Canal and the Indian Ocean.

Jardine Lloyd Thompson Group (JLT), which insures 14 per cent of the world’s commercial shipping fleet, said the unprecedented “private navy” would work under the direct control of the military with clear rules of engagement valid under international law. Early discussions have also been held with the Ministry of Defence, the Department of Transport and the Foreign Office.

The revelation comes as a coalition of shipping organisations and seafarers’ unions today call for governments to dedicate greater resources towards tackling piracy off Somalia.

Sean Woollerson, a senior partner with JLT, told The Independent: “We are looking at setting up a private navy to escort vessels through the danger zones. We would have armed personnel with fast boats escorting ships and make it very clear to any Somali vessels in the vicinity that they are entering a protected area.

“At the moment there is a disconnect between the private security sector and the international naval force. We think we can help remedy that and place this force under the control of the multi-national force. We look after about 5,000 ships and have had 10 vessels taken in total, including a seizure where one crew member was shot and killed. Piracy is a serious problem, these are criminals basically extorting funds, so why not do something more proactive?”

The force, which would have set-up costs of around £10m, would be funded by insurers and shipping companies in return for a reduction on the anti-piracy insurance premiums, which average around £50,000 per voyage and can reach £300,000 for a super-tanker. The maritime insurance industry, much of it based in London, has borne the brunt of the financial cost of the piracy problem, paying out $300m (£191m) in ransoms and associated costs in the last two years alone.

Major obstacles remain before the private navy can set sail, such as the legal status of a private force and it relationship with the Nato-controlled naval fleet. But major shipping companies and key insurers are keen to proceed with the plan. Although private contractors already offer armed teams on board vessels, the idea of a sizeable industry-funded naval force is a major departure and evidence of the strength of feeling there that more needs to be done to counter piracy.

A source at one major shipping organisation said the proposal was “viable”, although it was vital it did not lead to a down-scaling of the international military force.

A FCO spokesman said it had not yet received a “formal” proposal but added: “We believe that such a concept could be considered. It would need to be endorsed and supported by the UK in close discussion with coalition partners in current counter piracy operations.”

The prospect of the private sector directly intervening to protect the 6.8 billion tons of goods moved by sea each year is symptomatic of renewed alarm at the success of about 1,000 pirates controlled by Somali clans in disrupting the 22,000 ships which pass through the Gulf of Aden annually.

Using light fishing skiffs and armed with AK-47s, rocket-propelled grenades and ladders, the raiders attack hundreds of vessels a year, forcing seized crews to sail to the Somali coastline where they are held hostage until the ship owner agrees to pay a ransom. The problem peaked last year with 217 attacks and 47 ship seizures but despite the success of naval patrols in deterring raiders in the Gulf of Aden, the hijackings continue there and in the Indian Ocean, an area so vast that naval commanders admit it cannot be effectively policed. So far in 2010, there have been 123 attacks and 33 seizures.

As a result, shipping companies are contemplating the increased use of armed contractors on board their vessels, something previously considered more likely to escalate encounters with pirates.

MSC, the world's second largest container shipping company, announced this week that it will decide “within days” whether to arm its vessels. Pasquale Ferrero, assistant operations manager, said: “We do not have armed guards at the moment but we are considering their use to protect our crew, the ship and the cargo.”

A coalition of shipping companies, trade unions and welfare organisations yesterday sought to increase the pressure on governments and international bodies to provide more military cover and secure an agreement which allows pirates to be captured and prosecuted. Currently nearly all suspected pirates captured off the Somali coast are simply stripped of their weapons and allowed to return to port.

Spyros Polemis, president of the International Shipping Federation, said: “We need a new strategy and additional military resources. Governments must really wake up to the enormity of the problem, as the number of pirates continues to increase in the knowledge they can act with virtual impunity. The international community can no longer afford to sit on its hands and cede control of its vital seaways to criminals.”