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Somali pirate attacks increasing and costing more

The risks to ships transiting the pirate-infested waters off the coast of Somalia are on the rise. Last year, the average ransom paid to Somali pirates was $5.4 million compared with $150,000 in 2005. Just last week, Somali pirates captured a U.S.-bound tanker carrying around $200 million worth of crude oil in the Indian Ocean in one of the biggest hijackings in the area to date. The Irene SL, taken along with 25 crew members on board, was carrying 2 million barrels of oil which amounts to one-fifth of daily U.S. crude imports. The hijacking came a day after an Italian tanker carrying oil worth more than $60 million was also taken by Somali pirates.

A report today from Business Insurance outlined the latest hot spots in kidnap & ransom risks, saying that Somali piracy and Mexican kidnapping are on the upswing.

What is being done to mitigate the risk? Last month Jardine Lloyd Thompson Group announced the development of an escort patrol program that will launch later this month consisting of 16 armed boats in the Gulf of Aden with crews of ex-military personnel who are trained to intercept pirates before they can hijack merchant ships.

One Earth Future, a non-governmental foundation based Colorado, says that paying ransoms and insurance premiums, the increased costs of rerouting ships, purchasing security equipment and providing naval forces totals between $7 billion to $12 billion per year.

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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