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Baruna asked: What is the rationale behind India's demand for rollback of norms on piracy risk?

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  • Sarabjeet Singh Parmar replies: One major impact of piracy was the hike in insurance premiums for ships transiting piracy prone areas declared as ‘war risk areas’. Shipping insurance can be broken down into four main facets - war risk, kidnap and ransom, cargo, and hull insurance. War risk is the excess charge levied when a ship transits an area declared as a ‘war risk area’. Initially, in May 2008, the Lloyds Market Association (LMA) Joint War Committee declared the Gulf of Aden as a ‘war risk area’. This resulted in a 300 times increase in war risk premiums. Similarly, there were hikes in premiums related to insurance cover for kidnap and ransom, cargo and hull. Subsequently, in early 2011, due to the easterly spread of piracy into the Indian Ocean, the sea areas of the Arabian Sea up to the western coast of India were declared as a ‘war risk area’. The inclusion of this area resulted in Indian shipping companies paying extra premium for the transit time in the waters of the Indian Ocean prior to entering the Gulf of Aden or after exiting the Gulf of Aden.

    India has been lobbying with Lloyds to reduce the expanse of the declared ‘war risk area’ and exclude the waters adjacent to the Indian western coast as anti-piracy patrols by the Indian Navy and Coast Guard have resulted in a substantial decrease in acts of piracy in the waters near the western coast. As per reports, the number of piracy attempts in the Indian Ocean was reduced to around 70 by end of 2012 as compared to 237 in 2011 and 219 in 2010. Therefore, it is argued that there is a need for revision of the declared ‘war risk area’ and an attendant reduction in insurance premiums. The issue was addressed by the Indian External Affairs Minister Salman Khurshid while speaking at the recently concluded meeting of the Indian Ocean Rim Association for Regional Cooperation in New Delhi, wherein he said:

    “There is a need to be more precise in defining high-risk areas in Indian Ocean based on the actual incidents of piracy as this impacts adversely on insurance premiums and adds to the cost of shipping in our region.”