Insuring ships against piracy could become more expensive and subject to tighter conditions following a rise in piracy cases in the Indian Ocean and along the Horn of Africa over the past year.
A European naval operation in the Mideast, known as Eunavfor Atalanta, has reported an increase in attacks after five years of stability.
The trend was disrupted in November 2023 when a local dhow, the Al-Meraj 1, was hijacked, possibly due to a local fishing dispute.
At the end of 2024, Atalanta reported documenting 44 attacks over the previous 13 months, including attempted hijackings that were unsuccessful.
Shippers and traders warn that the increasing number of piracy incidents will lead to higher ship insurance premiums, ultimately driving up the cost of sea freight.
“Shipowners seeking financial protection against attacks by Somali pirates typically purchase marine kidnap and ransom cover, insuring themselves against the cost of raising and delivering multi-million-dollar ransom payments. If piracy cases continue to rise, insurance costs will inevitably increase,” said John Karissa, a Mombasa-based trader.
This week, a Yemeni fishing boat was seized off the Horn of Africa, barely a month after suspected Somali pirates released a Chinese fishing vessel.
Yemen coast guards stop a fishing boat as they patrol the Gulf of Aden to prevent piracy. Pirates have seized a Yemeni boat off the Horn of Africa.
Photo credit: File | AFP
Atalanta confirmed the latest attack, which targeted a dhow—a traditional ship used in the Mideast—off the north coast of Puntland, Somalia, near the town of Eyl.
The EU monitoring operation for the Horn of Africa stated that details about the vessel remain limited and that an investigation is ongoing.
“The incident is currently under investigation to confirm the circumstances. The fishing vessel is reported to be flagged in Yemen. The attack took place off Eyl, on the northern coast of the semi-autonomous Puntland region of Somalia,” said the EU in a statement.
In a separate report, maritime security firm Ambrey stated that the attackers stole three small boats equipped with 60-horsepower engines.
On Tuesday, Ambrey reported that “a suspected pirate action group has been sighted departing” off the coast of Eyl.
In January, a Chinese-owned fishing vessel, Liaoning Daping 578, which had been hijacked and taken to Xaafuun district in Puntland, was released with all 18 crew members unharmed. However, it remained unclear whether the $10 million ransom demanded by the pirates was paid.
With shipowners expected to raise their insurance premiums to mitigate piracy risks, Kenya has started enforcing a law requiring all importers to secure local insurance before their cargo is cleared at the port of Mombasa.
The government, through the Insurance Regulatory Authority (IRA) and Kenya Revenue Authority (KRA), announced that beginning February 14, 2025, all imports must have Marine Cargo Insurance (MCI) procured from a locally licensed insurance company.
In a joint statement, the two agencies emphasized that the digital system for MCI procurement will enhance efficiency and transparency.
A government notice dated January 7, 2025, stated that marine cargo insurance must now be obtained from a local insurance company, outlawing services from insurers not licensed under the Insurance Act.
“To ensure full compliance, the public is hereby notified that effective February 14, 2025, all importers shall be required to digitally procure Marine Cargo Insurance cover for their imports from locally licensed insurance companies,” read part of the notice.
The directive stems from amendments to the Finance Act, 2017, and the Marine Insurance Act (CAP 390), which mandate that individuals with an insurable interest in marine cargo must procure insurance exclusively from locally licensed insurers under the Insurance Act (CAP 487).
The legislation also prohibits importers from sourcing marine cargo insurance from foreign insurers, aiming to boost the local insurance industry and support Kenya’s economic growth.
This move is expected to enhance security for imported goods while ensuring compliance with regulatory standards.
The IRA has warned that importers who fail to comply with the directive will not receive a customs clearance certificate from KRA.
