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Hedging Bets on the High Seas

As the latest ship seizures off the coast of Somalia demonstrate, piracy has not let up following the Apr. 12 rescue of the Maersk Alabama's captain—despite the deaths of three of the pirates holding the cargo ship captive. "Until there's a solution in Somalia, the pirates will be as earnest as ever," says Joseph Keefe, editor-in-chief of The Maritime Executive. Also likely to be undiminished: the cost of insuring trips through East Africa's Gulf of Aden. Last year, bands of brigands in the region attacked 100 ships, capturing 42 of them, according to shipping journal Lloyd's List. In their wake, the price of kidnapping insurance—which typically covers an attack's crisis management, legal fees, and ransom (including the cost of the drop)—has soared for shippers, which are already struggling in the recession. "It could be $30,000 to $50,000 for a one-way transit," says Peter Townsend, head of the London-based marine hull unit of insurance broker Aon. "It used to be a fraction of that."

Aon (AOC) is now leading a move by a few insurers to create a new, equally pricey, kind of pirate insurance. For the past few months, Townsend's team has been creating "loss of hire" policies aimed mostly at shippers plying East African waters. The idea is to cover the loss of earning capability—a ship's daily leasing fee and cargo—should pirates seize the vessel. The price of such coverage, sold for single trips, is typically set at about 75% of what a ship owner gets for a day's lease. (Leasing day rates have been $25,000 to $40,000 in the policies Townsend has placed with insurers so far.) The new coverage, which aims to make up losses incurred in up to 60 days of captivity, costs a bit less if the policyholder makes efforts to repel pirates. There's a price break for a hull that rises high—say, 15 feet—from the water line, as well as discounts for speedy engines, decks ringed by barbed wire, and fire hoses manned 24/7 when the ship is in transit. The price is set "a few days before the vessel goes to transit," Townsend says, so it can be reduced further if there's been a piracy lull in the preceding few months. As yet, Townsend has had inquiries but "not many orders" for the policies. That may change. "In the absence of a better solution," says Keefe, "it wouldn't surprise me if people started buying the coverage."

Bedroom Startups

The latest cost-slashing trend for the geekerati? Taking a page from the past (think Bill Hewlett and Dave Packard) and bunking together to get their startups off the ground. According to adherents, "going lightweight" cuts monthly expenses by up to two-thirds. "We looked at the economy and said, 'This is the right thing for us to do,'" says Adam Bouhenguel, who lives in a "super-geeked-out" Boston apartment with Josh Wilson, his co-founder at Tsumobi.com, a maker of social networking software for mobile devices. Also in Boston are Dan Haubert, 25, and Tom Davis, 24, who moved in together to launch TicketStumbler.com, which aims to be the Expedia (EXPE) of sports and concert tickets. The "ugly dump," says Haubert, lets them "live and run a business on a few thousand a month." Then there's Marcus Nelson, 37, who co-founded UserVoice.com, an online suggestion box. Last year, Nelson, his wife, Emily, and their two children moved from Wasau, Wis., to a Santa Cruz (Calif.) beach bungalow with partner Richard White, 28. "We sleep with our laptops," says Nelson, who estimates that monthly expenses come to $15,000, a third of what they might be with separate living and office spaces. Are venture capitalists taking note of such frugalities? Longtime Silicon Valley angel investor Ron Conway says he is: "I love to invest in scrappy entrepreneurs."

A Drug-Free Web

Paid drug ads recently disappeared from search engine pages. The reason: On Apr. 3, the Food & Drug Administration sent warning letters to 14 of the world's biggest drug companies decreeing that such banner ads must include information about risks. The problem is there's no room for such lengthy warnings on the tiny ads. Marketing experts say drugmakers long assumed it was O.K. to have warnings be one mouse click away, a rule discussed—but not put in writing—at the only FDA forum held on Internet ads, in 1996. Pharma companies spend just 3% of their ad budgets on the Web, though several are experimenting with blogs, YouTube (GOOG) videos, and Twitter feeds. Reacting to the new FDA demand at a pharma forum on Apr. 8, Jeffrey Francer, a spokesman for industry group PhRMA, called on the FDA to initiate a public process to draft Internet ad rules "rather than regulating by warning letter in an area where there is now a lack of clear standards."


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