Plans for a private fleet of armed patrol boats to protect ships negotiating
Plans for a private fleet of armed patrol boats to protect ships negotiating the pirate-infested waters off Somalia have received a huge boost after a prominent insurance figure agreed to provide financial support.
Financial backing from Martin Reith, the founder and former chief executive of the Lloyd’s of London insurer Ascot Underwriting, means that the Convoy Escort Program could be up and running as early as this summer.
Mr Reith has become the lead investor in a $US30 million fundraising by the pioneering project, the commercial brainchild of insurers on the Lloyd’s market seeking to reduce the costs caused by Somali piracy.
CEP has embarked on investor roadshows in an effort to secure the remainder of the funds. Success would mean that the program could buy its first seven second-hand vessels and would also help to finance the armed security guards that would be on board.
As well as four crew and eight armed security personnel, each vessel would have inflatable speedboats, or “ribs”, that could be launched into combat if pirates threatened ships. The escort program has already identified the boats that it wants and has a manufacturer for its ribs.
The project is hoping to attract further investment from private equity, individuals of high net worth and even some of the world’s shipping operators for a fleet that aims to complement existing navies. Once successful, the plan calls for a second fundraising of $US40m.
The potentially lethal dangers of trying to navigate with cargo through the treacherous Gulf of Aden have sent insurance costs soaring for shipping operators.
The “war risks” they must insure against, as well as kidnap and ransom fees that run into millions, can cost shipowners an additional $US40,000 to $US50,000 for each vessel they send through. Experts say that the cost of armed guards can easily reach $US18,000 per boat, per trip.
The fleet, which would provide protection guarantees for shipowners, plans to charge a flat fee in three bands based on the speed capabilities of the boats they are accompanying. The fee, thought to be about $US30,000, would be slightly less than prevailing costs and should reduce significantly any other insurance premiums that an operator might pay.
Once the private fleet is operating, the programme hopes to buy a further eleven vessels, enabling it to run 16 day to day and have a further two in reserve. At full strength, the patrol boats could accompany about 470 ships a month through the Gulf of Aden, equivalent to about 25 per cent of the traffic that plies the vital shipping lane.
One of the main architects of CEP is Sean Woollerson, a partner in the marine, oil and gas division of Jardine Lloyd Thompson, an insurance broker that negotiates, among other things, war risk and kidnap and ransom cover.
Mr Woollerson has shunned the tag “private navy”. “This is not a navy,” he said. “What we’re trying to be is a deterrent force. Prevention is within our reach.”
Working with other Lloyd’s players, including underwriters at Ascot and Marketform, he has spent the past three and a half years bringing the program to fruition. There are now 21 companies, including two law firms, auditors and risk managers, that work with CEP.
Angus Campbell, a former director of Overseas Shipholding Group, the world’s second-largest listed oil tanker company, has been appointed chief executive. The company complies with maritime law and is supported by the Baltic and International Maritime Council. It will observe the International Maritime Organisation conventions, such as the Safety of Life at Sea treaty. CEP has discussed its idea with the Royal Navy and NATO.
Although it will provide protection for ship operators from all jurisdictions, it has been authorised to sail with the flag of Cyprus, the largest ship management country in the European Union and a leading anti-piracy nation. Cyprus is poised to pass legislation that will authorise the use of armed escorts, provided by the private sector, for its vessels.
Mr Woollerson regards CEP as a partnership between insurers and the shipping industry. He likens it to the way in which the London Fire Brigade was established. Until fire brigades were set up as a public service during the 1860s, the responsibility for putting out fires, and compensating victims, was taken on directly by insurance companies.
Source: The Times
