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Threat of piracy could push up cruise travel insurance prices

Cruise ship

Forget Johnny Depp, modern pirates are dangerous and greedy. They snatch oil tankers and cargo vessels from under the noses of the world’s best navies.

 

It is an insurer's nightmare: Heavily armed pirates, emboldened by their success in capturing cargo vessels, hijack a cruise ship with hundreds of well-heeled passengers and ask for massive ransoms.

 

They have not succeeded yet, but many piracy experts believe it is only a matter of time before they do. The failed attack last week on the luxury American cruise liner MS Nautica has shown the threat is real, raising questions about what impact piracy may have on cruise ship insurance costs. Largely unreported in the UK, earlier last week the German Navy thwarted a suspected piracy attack on a German cruise ship bound for Dubai. The German military vessel chased off two pirate boats with warning shots. The pirates were trying to intercept a ship carrying 492 guests and crew. The ship had not noticed the incident nor asked for assistance, and the pirates never got closer than three miles from the ship.

 

One of the greatest impacts on insurance rates is increased exposure. And if you have increased exposure to something like piracy, it's going to result in higher costs.

 

Travel insurance companies have so far not increased rates for tourists taking cruises. This is on the basis that there have been no successes and that most cruise ships will avoid dangerous waters.

 

Another reason for their laid back approach is that no insurer will cover ransom payments. Most will cover costs such as medical expenses and repatriation were someone to be injured or suffer a heart attack when taken hostage.

 

Many travel insurers will not cover people travelling to areas where Britain's Foreign and Commonwealth Office had advised travellers not to go. The FCO advises against all travel to Somalia itself, and advises ‘mariners to maintain a high level of vigilance and to exercise extreme caution when anywhere near Somali waters.’

 

Overall, cruise ships are probably in a better position than merchant vessels in facing pirates: they are faster than cargo ships, and their tall hulls make it harder for bandits to throw hooks over the side and board. In the Nautica attack, a small band of pirates in two small speedboats fired shots at the roughly 180-meter (600-foot) long ship as it crossed the Gulf of Aden. The ocean liner increased speed and outran the bandits. Speed can be useful, but pirates are upping the ante on arms and using military rocket launchers. A cruise ship captain faced with the risk of passengers being killed by rockets is not going to run that risk and hope he can outrun the pirates. And with destinations such as the Mediterranean and Caribbean available to pleasure-seeking tourists, cruise ships don't necessarily have to sail through dangerous waters. But passengers tend to book months in advance, and some companies have already set itineraries through pirate-infested waters.

 

With pirates attacking ships in international waters even when they are part of a naval convoy, and even when ships have specialist guards, many believe it is only a matter of time before pirates take a cruise ship.

 

One thing is clear, anyone going on a cruise without travel insurance is tempting fate.

  

Travel insurance: News update: December 2008

 

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