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Friday, September 21, 2018

Shipowners challenge Malacca Strait war risk zone

The International Chamber of Shipping (ICS) and the International Association of Independent Tanker Owners (INTERTANKO) co-hosted a briefing, 16 August, to give industry and government interests the opportunity to meet with the London insurance market Joint War Committee (JWC) and its consultants, Aegis Defence Services Ltd

This followed the furore surrounding the announcement by the JWC of a new method for determining its Hull War, Strikes, Terrorism and Related Perils Listed Areas.  As a result of the JWC’s decision to include the MalaccaStrait and certain areas of the southern Philippines in the Listed Areas, Asian shipowners and governments were particularly well represented.

The JWC opened the briefing by explaining why current trends had required it to approach risk assessment from a different perspective by employing the services of risk assessment experts.  The result of this was the appointment of Aegis which in turn, following their expert advice, had seen the removal of several previously listed areas and the insertion of others including the MalaccaStrait.

Aegis explained that the ports, places and coasts included on the list had been assessed by them to exceed an enhanced risk benchmark that they had established.   Aegis had developed a threat assessment system which was updated regularly on a daily basis which they said enabled them to more accurately and specifically assess risk.  The list was proactive rather than reactive looking principally to the future and to past trends only where relevant.  Regular quarterly reviews would determine whether any additions or deletions were appropriate.

During the question and answer session that followed, shipowner and government representatives questioned the methodology employed by Aegis.  It was suggested that in relation to the MalaccaStrait, Aegis might have confused threat assessment with vulnerability assessment.  Although the Strait was vulnerable, there had not been a single terrorist attack in the last 13 years.  A blanket categorisation of so vast an area which included the Strait was unjustified because most incidents were confined to slow, small coastal vessels. Aegis responded by saying that despite the apparent reduction of incidents there were also unreported robberies.  Although there was an increased sophistication, including faster and more military-type craft and weapons, which had led Aegis to view the Strait as an area of higher risk they acknowledged there had been no terrorist attacks.  Extensive measures were being taken by the littoral States including aerial patrols and increased radar coverage but Aegis pointed out that this could only be effective if the three governments closely co-operated in applying the measures.   The position of the MalaccaStrait would be kept under close review.

JWC gave the clear message that it was incumbent on individual owners to negotiate appropriately with their underwriters.

Shipowners and governments urged the JWC to consult more widely, to review their position, and, during this time, to refrain from imposing additional premiums in the MalaccaStrait.


ICS contact:  Linda Howlett  (Tel + 44 20 7417 8844)

INTERTANKO contact:  Bill Box (Tel + 44 20 7977 7010)