Risk Management

The Arms Race Against the Pirates


On Apr. 14 the International Chamber of Commerce reported that piracy at sea had hit a high. In the first three months of this year, according to the Chamber's International Maritime Bureau (IMB), there were 142 attacks, the most in the first quarter of any year since the bureau began keeping track in 1991. Somali pirates were responsible for most of these attacks, which have increased sharply in number and level of violence since 2006, when Islamist authority on Somalia's coast began to crumble in the wake of a U.S.-backed invasion by Ethiopian troops. Last year, pirates used guns in at least 243 attacks and took 1,181 hostages. They're now armed with AK-47s and rocket-propelled grenade launchers. They are taking bulk cargo carriers and oil tankers along with their crews and demanding multimillion-dollar ransoms.

To deal with this 21st century version of an ancient threat, ship owners, often at the behest of their insurers, have resorted to tactics old and new—from razor wire, fire hoses, and safe rooms to long-range acoustic devices, laser dazzlers, and, most recently, armed guards. They have little choice: While international naval forces have stepped up their patrols—creating an Internationally Recommended Transit Corridor through the Gulf of Aden in 2009—pirates have responded by widening the scope of their operations, launching their skiffs from mother ships far out at sea as well as from the coast. As a result, the shipping industry has largely been left to fend for itself in some 2.8 million square miles of ocean. "The Indian Ocean is basically the rawest Wild West," says John S. Burnett of Maritime & Underwater Security Consultants (MUSC) in London.

Two years ago a consortium of 11 industry groups, including the International Chamber of Shipping and the Baltic and International Maritime Council, began publishing a set of Best Management Practices (BMP) for vessels passing through high-risk areas. According to BMP, now in its third iteration, the speed of a ship and its freeboard (the distance between sea level and the deck) are paramount. Vessels with decks more than 25 feet above the water are rarely attacked. And no ship traveling at more than 18 knots has been successfully boarded. The most lucrative targets, especially oil tankers, are also the most vulnerable. Ships known as VLCCs (for Very Large Crude Carriers) typically move at a maximum speed of 14 knots and, when fully loaded, their decks are only 12 feet above the waves, says Michael G. Frodl, an emerging-risk consultant who assesses piracy for underwriters associated with Lloyd's of London. "I'm an out-of-shape 50-year-old," he says. "With a rope, even I could figure out how to get over 12 feet."

When pirates do try to board, BMP suggests establishing a citadel, or secured space below deck where the crew can shut down the engines while they hide and wait for help to arrive or for the pirates to abandon the ship. "Some people think just putting a lock on the engine room door is a citadel," says Peter Dobbs, a senior underwriter for Catlin, one of the major maritime insurers at Lloyd's. "Good citadels control the ship, have an independent air supply and satellite communications, are within two or three cordons of security, and probably can't be found by the pirates." Even the most advanced citadel, however, won't defeat pirates if even one crew member is left outside. In the case of the Maersk Alabama, a cargo ship that made headlines in April 2009 as the first U.S.-flagged vessel to be seized by pirates off the coast of Africa in more than 200 years, most of the 20-member crew locked themselves in the engine room. The captain, Richard Phillips, stayed above deck and was eventually taken hostage on a pirate lifeboat. He was rescued days later by Navy SEAL snipers.

"They are very adaptive," MUSC's Burnett says of the pirates. "They're not just poor fishermen looking for an easy hit." Pirates are aware of many deterrence strategies. They carry blankets and gloves to throw themselves over razor wire strung along the deck. They ignore dummy watchmen strapped to rails. In one instance, they used welder's cutting equipment to breach a citadel. "When this all first started, insurers were giving pretty good discounts for razor wire around the ship," says Lars Gustafson, senior vice-president of the marine practice at Marsh insurance brokerage. "You make a move, the pirates make a move."

Now security companies are offering far more sophisticated countermeasures. In 2005 the safety officer on board the Seabourn Spirit cruise liner braved shrapnel and gunfire to deter attackers off the coast of Somalia with a sonic cannon, or Long Range Acoustic Device, that blasts a cone of high-decibel noise. Since then, says Robert Putnam, head of media relations for LRAD (LRAD), the company that makes the device, there has been a steady order flow from the maritime industry. The current, top-of-line LRAD system can be integrated with the ship's radar and operated without putting crew in harm's way. Since determined pirates can wear headphones and carry on with their attack, the LRAD is now mainly used for separating attackers from fisherman by broadcasting a pre-recorded warning.

Shippers can also buy laser dazzlers that throw a 10-foot-wide beam of blinding green light; draglines that catch on pirate skiffs' propellers, and even unmanned patrol vehicles. The Southwest Research Institute, a nonprofit based in San Antonio, has developed a "mobility denial system," a gelatinous chemical spray that is both sticky and slippery—it adheres to a shoe or a wall but not to itself—and could turn the surfaces of a ship into a veritable ice rink. And earlier this month the U.S. Office of Naval Research (ONR) successfully tested a high-energy laser at sea, setting fire to the outboard motor of a small boat from a range of more than a mile. Michael Deitchman, director of air warfare and weapons at ONR, says the laser is probably a couple of years away from being available to shipping companies.

In the eyes of insurers, however, there is no equal to the threat of lethal force. Says Clive Stoddart, global head for kidnap and ransom for Aon Risk Solutions insurance brokerage: "There really is no substitute for having a weapon: live ammunition carried by people who have the right training." Marsh's Gustafson states the case simply: "Not one ship has been taken that has an armed security team on board." For a tanker transiting high-risk waters, an armed, four-person security detail costs about $30,000. That's expensive, but insurers are willing to discount premiums by as much as $20,000 for ships that use them, says Catlin underwriter Stuart Allen. Catlin's Dobbs relays the report of one security firm: In 1,000 transits through treacherous waters there were 90 encounters with pirates. Seventy-two were resolved simply by showing arms. Of the remaining 18, three were deterred by warning shots fired into the air, and 15 by single shots fired near the pirate vessel.

Gustafson expects the pirates to begin taking more risks and eventually start winning a few firefights, most likely within the year. Many in the industry are both wary of escalation and resigned to it. "I regret to say, I think it's inevitable," says Scott Bergeron, chief operating officer of the Liberian International Ship & Corporate Registry. "There aren't enough of these guys to protect the ships," says Frodl. "And by the time you start hiring guys to fill in the void, you're going to get guys who really aren't qualified for the job."

The bottom line: Insurers are asking shipping companies to arm themselves to deal with a spike in attacks from Somali pirates.

Boudway_190
Boudway is a reporter for Bloomberg Businessweek in New York.

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