Piracy to hike premiums

Munich Re expects insurance premiums against high sea piracy to rise, as well as the risk of piracy spreading in the world, the German company's head of marine insurance Dieter Berg told Reuters.

At a UN conference on piracy on Wednesday, International Maritime Bureau Director Pottengal Mukundan told Reuters the arrival of foreign navies in the last two months has cut attacks by pirates off the Somali coast.

Berg told Reuters: "We certainly have to watch what is going on carefully. Naval ships are down there only since early December. I think at the moment insurance rates are on the rise and they have to rise. Also claims have to be paid.”

Berg expressed concerns that attempts to hijack ships could spread to other areas such as southeast Asia and the eastern coast of Latin America.

"There are rumours that the business model that Somalia pirates are using will become popular around the world," he said.

"In the past pirates were just taking the cargo and stealing the crew's money and equipment. This was the traditional piracy, which was not an issue for the insurance industry. Somali pirates are not interested in the cargo but the ransom being paid for the ship, the cargo and the crew."

At the moment the need from shipping companies for hijacking insurance is mainly because of the exposure to Somalia and Nigeria, he said.