International navies have cracked down on pirates, including strikes on their coastal bases, and ship firms are increasingly using armed guards and defensive measures on vessels including barbed wire, scaring off Somali seaborne gangs.
That reduced the number of incidents involving Somali pirates to just 69 in the first half of 2012, compared with 163 in the same period last year, according to watchdog the International Maritime Bureau.
“The chance of pirates being able to carry out successful hijackings is now very slim, which is probably deterring many would-be pirates from going to sea,” said Rory Lamrock, an intelligence analyst with security firm AKE.
War torn Somalia is next to the Gulf of Aden’s busy shipping lanes, and poverty has in recent years tempted many young men to take up piracy, storming commercial vessels and holding their crews and cargo to ransom.
Last year, they netted $160 million, and cost the world economy some $7 billion, according to the American One Earth Future foundation.
The drop in Somali pirate activity is weighing on the market for so-called marine kidnap and ransom insurance, which has grown from scratch to be worth about $250 million in little more than five years, according to informal industry estimates.
Spending on marine K&R cover, which indemnifies ship owners against the cost of paying ransoms and recovering vessels and crew, has halved compared with two years ago, estimates Will Miller of Special Contingency Risks, a unit of insurance broker Willis.
“We are seeing a softening in the rates that underwriters are charging for piracy cover,” Miller said. “The key driver is the implementation of more robust security measures on board by the shipping community.”
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