MARITIME | Shipping ‘biggest obstacle’ to ending piracy

Key players have an interest in its existence, claims German study

SOMALI piracy is likely to remain a problem because the key players have an interest in its existence, a research paper published [in German] by the German Institute for Economic Research DIW has found.

The study emphasised the role of the insurance industry, which, it claims, has an interest in the persistence of piracy. “Insurance companies, although they have to pay out ransoms, also make considerable profits because of their ability to raise premiums for piracy, which is still very rare,” authors Sarah Percy and Anja Shortland claim.

Risk analysts and companies that provide services in ransom negotiations were also among those who benefit from Somali piracy, they said. “The cost of the ransom is in the region of only a fifth of the total costs arising from the average successful hijack,” the researchers write.

However, the paper found that the “perhaps largest obstacle to ending piracy” was the shipping industry itself.

According to Ms Percy and Ms Shortland there were not enough incentives for shipowners to alter their procedures in a way that would end piracy. They pointed to the fact that only a small percentage of the ships trading off Somalia actually become victims of piracy.

About 20% of ships trading in the area choose not to make use of the transit corridor provided by the Atalanta mission, they said. “Many shipowners are choosing not to spend the money to institute even the cheapest of practises recommended by the navy, like putting barbed wire on ships.”

Ms Percy and Ms Shortland work at the University of Oxford and the Brunel University respectively and conduct research into International Relations and Economics and Finance. The DIW is Germany’s largest economic research institute.



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