Kidnap and ransom insurance common hijack cover

Some crew members aboard the MV Asphalt Venture, a Panama-flagged ship that pirates seized off the coast of Africa in September 2010, were freed after a ransom was paid, but seven others were held, re/ REUTERS

Specialist kidnap and ransom insurance has emerged as the most effective way to cover the costs of a hijacking, said Will Miller, London-based divisional director of special contingency risks in Willis Group Holdings P.L.C.'s kidnap and ransom division.

K&R coverage can be packaged with marine hull and war insurance to cover vessel damage and hijacking costs, he said.

Shipowners buying a K&R policy receive a discount in their war risk premiums, and underwriters may be willing to return a portion of the premium for preventive measures, such as the transit consulting services that help plan the safest routes to avoid pirate hotspots, experts say.

While shipowners look primarily to their marine hull, war and K&R policies to cover physical damage and ransoms, P&I clubs also are paying certain piracy-related losses, said Andrew Bardot, secretary and executive officer at the London-based International Group of P&I Clubs.

P&I club coverage is triggered chiefly by risks to shipping crews, said Joe Hughes, chairman and CEO of New York-based Shipowners Claims Bureau Inc., the manager of the American Club.