August 8, 2011 / 11:52 AM / in 7 years

Ship insurers add Benin to risk list after attacks

* Gulf of Guinea seeing growing spate of attacks

* Concerns over possible rise in ship insurance costs

By Jonathan Saul

LONDON, Aug 8 (Reuters) - London’s marine insurance market has added Benin to a list of areas deemed high risk due to an escalation of pirate attacks in the area, a senior official said.

Pirates attacked two Panamanian-flagged tankers carrying oil off the coast of Benin last week but were driven off by the Benin navy before they could steal the cargoes.

The incidents were the latest in a string of attacks on ships in the Gulf of Guinea off west-central Africa that analysts say is threatening an emerging trade hub and a growing source of oil, metals and cocoa to world markets.

Last week the Joint War Committee (JWC), which groups syndicate members from the Lloyd’s Market Association (LMA) and representatives from London’s insurance company market, added Benin to a list of areas it considered high risk for merchant vessels and prone to war, strikes, terrorism and related perils.

“There have some incidents in that area and the underwriters need to be able to react,” said Neil Smith, head of underwriting at the LMA. “It will be up to underwriters to determine the cost of policy cover,” he told Reuters.

Gulf of Guinea nations produce more than 3 million barrels of oil per day (bpd) — about 4 percent of the global total — mostly for European and American markets, with the bulk coming from OPEC-member Nigeria at 2.2 million bpd.

The JWC also added the waters off Benin and Nigeria’s exclusive economic zones in the Gulf of Guinea to the high risk zone.

“Costs will likely increase if insurance premiums rise for vessel operators working in the region,” said John Drake, a senior risk consultant with security firm AKE.

Other countries on the JWC list include Iran, Pakistan, Ivory Coast, Somalia and Yemen. Libya was added in March.

Stretching from Guinea in west Africa down to Angola in the southwest, the Gulf of Guinea spans a dozen countries.

An Italian tanker was freed in late July after having being seized by pirates in the Gulf of Guinea off Benin.

“Benin is seeing a current spike in activity, but there have been other spikes in other parts of the region over the past two years, such as off the coast of (Cameroon’s) Bakassi peninsula,” said Drake.

“The Niger Delta is also an area of concern, and opportunist criminals pose a risk in a number of harbours in the region.”

Piracy in the Gulf of Guinea is rising but is not on the scale seen off Somalia, where armed seaborne gangs in the Indian Ocean are making millions of dollars in ransoms and becoming increasingly violent.

“The recent spate of hijackings off Benin does not indicate that Somali pirates have arrived in the region to set up a local franchise. It does, however, indicate that pirates can and will look to how ‘the competition’ is doing,” said Michael Frodl, a Washington lawyer and head of C-LEVEL Maritime risks.

“Pirates off West Africa are now at the very least being inspired by the example of Somalis.”

AKE’s Drake said conditions would not become as bad as witnessed off Somalia. “While under-resourced, there is at least a police force and judiciary in place in the Gulf of Guinea who will be able to stop pirates from holding vessels for large detention periods,” Drake said. (Editing by Mark Heinrich)

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