Pirate attacks in the Gulf of Aden and Indian Ocean, continue to be a problem for the
shipping community with vessels being hijacked and held for many months prior to being
released. This can result in a heavy expense to a charterer during a period when they are
not earning any income. Notwithstanding this exposure, many Charterers are still prepared,
or compelled commercially, to transit the Suez Canal and the Gulf of Aden.
The insurance responds to a charterer’s legal obligation to pay hire (or demurrage)
continuously to the shipowner in circumstances where the charterer is deprived of the use
of the chartered vessel due to an act of piracy. The cover operates worldwide but it is
specifically targeted at vessels transiting the Gulf of Aden or Indian Ocean.
Most time charterparty forms will not consider detention through hijacking by pirates as an
off-hire event and indeed Charterers have had limited success in negotiating amendments
or inserting additional off-hire clauses that would make piracy an event that exempts
Charterers from paying hire. A Charterers’ obligation to pay hire can be open ended (the
default position in most standard forms) or be limited to a specific number of days if clauses
like the BIMCO Piracy Clause for Time Charters is incorporated (in which case the period
that the vessel remains on hire is capped at 90 days). BIMCO has also published two clauses
for voyage charters which includes a clause for consecutive voyages where the Charterer is
liable for one half of the demurrage for the period of detention.