RISKAFRICA_December_danger_zone

Welcome to the
DANGER
ZONE
Increase in K&R cover for
tactic-changing West African pirates
After successfully conquering Somali pirates in the Gulf of Aden, the world is looking for
a playbook that will work in the Gulf of Guinea – the new piracy hotspot of the world.
Tactics have changed from capturing ships to holding human hostages for ransom,
emphasising the need for comprehensive kidnap and ransom (K&R) cover.
ANTON PRETORIUS
After troubling Africa’s East Coast for
several years, maritime pirates have
found new looting ground in West
Africa. But pirates have not only
shifted regions, but they have also changed
tactics too – realising that they can make more
money from kidnap and ransom as opposed to
cargo theft and ship hijacking.
The Gulf of Guinea has now become the
world’s most dangerous body of water, with
pirates carrying out 54 attacks in its waters last
year and causing more than $719.6 million
(R10 billion) in economic damages, according
to a report from US-based Oceans Beyond
Piracy (OBP). The report shows that of the total
54 piracy incidents, 40 per cent of those were
attempted kidnapping and abduction cases
(346 seafarers affected).
Jared Higgins, CEO of Arcfyre Group – a
leading protective services company that has
extensive experience in hostile and unstable
environments, says that West Africa has had
issues with piracy and terrorism for some time
now. He’s seen a significant change in trend
from maritime-based piracy to land-based
kidnapping. “In East Africa, Somalian pirates
operated in an area that was, essentially,
lawless. Their modus operandi was to grab
vessels and hold them to ransom. In West
Africa, pirates have realised that human
hostages provide quicker turnaround time and
a bigger payload, which has led to an increase
in maritime-based kidnapping,” he explains.
East to West: Eradicating
piracy in the Gulf of Aden
The continued stability in Somalia, a heavy
presence of European and US navies in the
western Indian Ocean and a security-conscious
maritime industry has seen the piracy menace
that had plagued the Horn of Africa reduced
to an all-time low. States in the Gulf of Guinea
region continue to increase maritime security
and cooperation, but capacity is still lacking.
Fuel costs decreased by nearly 50 per cent,
resulting in significant cost savings related to
naval patrols and deployments.
OBP estimates show that $349.1 million
(R4.8 billion) – 49 per cent of total expenses
– was spent on contracted maritime security
(embarked teams, secure zone fees,
contracted patrol vessels, and safety escorts) in
2015 alone.
“In Somalia, for them to plunder this boat
or get the boat into an area where they can
hold it would take days (or even months). The
improvement in the naval security response in
East Africa has made this virtually impossible,
and that’s why we have seen a massive
decrease in piracy incidents off Somalia and
the Gulf of Aden,” says Higgins, adding that
security response capabilities in the Gulf of
Guinea are far less efficient than it has been off
the coast of Somalia. In the Gulf of Aden along
Africa’s east coast, several effective measures
were implemented to deter piracy.
“Vessels used shipping routes that were
further offshore, which made it harder for
pirates to travel in their small boats or
dhows to reach these vessels,” he explains.
The decrease in piracy along the Gulf of
Aden was also thanks to an improvement in
onboard deterring systems like rigging the
ship’s deck with barbed wire, water cannons
and more armed security personnel.
But the difference in the Gulf of Guinea is that
ships are attacked during anchorage, making
it virtually impossible for them to get away. “In
West Africa, boats in anchorage are sitting
ducks,” says Higgins.
West African pirates’ modus operandi
includes boarding the vessel and ransacking
it for cash, jewellery and other valuables.
It also comprises grabbing crewmen. In
30 minutes to an hour, the pirates have
taken what they came for and are heading
back to the Niger Delta, where they hold the
captives hostage.
As the world became more aware that
piracy was becoming a problem, particularly as
it had a huge impact from a global economic
standpoint, more and more organisations
were prepared to contribute towards mitigating
factors that could essentially reduce the risk of
vessels being targeted.
“It’s still perceived to be robbery because the
vessel is not being taken and individuals are
being held captive,” says Higgins, “For years,
kidnapping in Nigeria has been a prolific
problem. The fact that they are now taking
people off ships and holding them on land
doesn’t really make a fundamental difference in
the perceived kidnapping problem in Nigeria.
West Africa’s response to the problem has been
much slower.”
The big heist
Higgins points out that talking about ransom
amounts is difficult because the nature of the
negotiation process is confidential and one
has to be careful about releasing too much
information about how much is paid for a
vessel. However, he adds that in excess of
$100 million (R1.3 billion) has been paid for
captured boats.
“It’s largely dependent on the size of the vessel,
the cargo it carries and how valuable it is to
the entity that owns the vessel. In 2011, there
was an incident with an Italian ship (MV Savina
Caylyn) where an amount of $10 million (R137
million) was reportedly paid to get the vessel
back.” Higgins says that, from an individual
perspective, the amount for kidnap and ransom
can vary. “There have been reports of between
$400 000-$500 000 (R5.5-6.8 million) paid to
get a human hostage back. It depends on the
hierarchy of that person within the ranks of the
ship. Oftentimes, more money is paid for the
captain. A paler skin also plays a big role
in ransom amounts.”
The OBP reports that in 2015, piracy in the
Gulf of Guinea was significantly more
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violent than in the previous year. Here, pirate
attacks are the most violent of the regions
studied and often include direct confrontation
with the crew. Higgins explains that while
deaths have not been common, there have
been incidents of individuals being killed
during the process. “When pirates were
boarding the ship, crew either tried to resist
or flee and pirates used violent and
life-ending force.”
What’s important to consider here is the
timeframe. The average time that a hostage
is held captive when a vessel is taken was
anywhere between two to four years because
the negotiation process took much longer.
When an individual is taken off the Gulf of
Guinea, the time frame can vary from one to
three weeks.
“The likelihood of someone dying in captivity
is a lot less in the Gulf of Guinea,” says
Higgins. “However, conditions are often poor
and squalid, and there have been reports of
hostages being exposed to malaria. They’re
often underfed and have little to no water to
drink. We’ve also seen a big psychological
impact during and after the kidnapping
process. The impact it has had on individuals
has been dramatic.”
With only one recorded incident of cargo theft
in 2015, the kidnap and ransom attacks are
currently the most dangerous. These attacks
were directed at a greater diversity of shipping
targets, but are now a threat to all types of
vessels, says the OBP.
Shaping up the K&R cover
Andrew Munro, managing director of Praesidio
Risk Managers, says that the security risk
environment has evolved significantly since the
days when the first K&R insurance policy was
designed. “However, it’s also the awareness of
this insurance that has certainly proliferated in
THERE HAVE BEEN REPORTS OF
BETWEEN $400 000-$500 000
(R5.5-6.8 MILLION) PAID TO
GET A HUMAN HOSTAGE BACK.
IT DEPENDS ON THE HIERARCHY
OF THAT PERSON WITHIN
THE RANKS OF THE SHIP.
OFTENTIMES, MORE MONEY IS
PAID FOR THE CAPTAIN.
recent years. Companies have become more
engaged in this area of insurance as their
awareness of their duty of care obligations to
their employees and the potential legal liability
has increased.”
Globalisation, and the relative ease of air
travel, has led to increased exposure to these
perils by a wider range of organisations.
Corporate travellers are increasingly looking
to new and emerging markets and, in doing
so, find themselves exposed to risks that are
outside of their traditional business planning.
“Coupled with this, terrorism is increasingly
targeting human rather than physical assets
and driving an awareness within organisations
for the need to prepare for other lowfrequency,
high-impact events which could
involve their workforce,” explains Munro.
He adds that K&R cover can be designed
specifically to suit a client’s risk appetite and
exposure. A corporate policy can cover
kidnap, extortion (including products extortion
and cyber extortion), illegal detention, hijack,
hostage crisis and disappearance as the
core perils, with various extensions bolted
on to enhance and broaden the cover such
as emergency evacuation, express kidnap,
active shooter and business interruption loss
of earnings.
“The primary benefit of this policy is that it
provides a client with immediate and unlimited
access to crisis response consultants who
will support the client for the whole duration
of a crisis – providing business continuity
support, family liaison, media liaison and
hostage negotiation advice,” says Munro.
Secondary to this, there is the financial
indemnity protection, which covers losses such
as ransom payment, medical care, salary of
employees who are the victims of an event,
PR consultancy and legal advice, legal liability
and personal accident benefits for injury,
disablement or death of the victim.
Munro highlights a case study to help
illustrate the complexities of K&R cover. In
Port Harcourt, Nigeria, unidentified gunmen
attacked an armed convoy and kidnapped
three expat contractors travelling to work
at a power plant. Reports suggested that a
driver and police escort were shot and killed
during the attack. A $2-million (R27 million)
ransom was reportedly demanded. “The
response consultant, whose fees and expenses
are covered up to an unlimited amount of
the policy, was immediately deployed to
Lagos where the consultant assigned a crisis
management team to manage the case.”
He says that the consultant worked with the
company to ensure business continuity but,
more importantly, assisted in maintaining
liaisons between the company and the victims’
families as well as with the media. The
consultant also supported the client with the
hostage negotiation process, informing the
appropriate authorities and collecting crucial
evidence to locate the perpetrators.
After 17 days of negotiation, the three
employees were released following a ransom
payment. The ransom was reimbursed in
full by the insurer. Following the incident,
the victims and families needed medical
and psychological care. The policy provided
cover for these expenses alongside rest and
rehabilitation (the company paid for the
victims to have a holiday with their families
– the costs of which were refunded by the
policy), including cover for their salary during
and after the incident as well as travel and
accommodation for their trip and repatriation
back home.
Risk mitigation and crisis
management
Clients who purchase this policy are becoming
increasingly interested in the risk mitigation
aspect of this policy, says Munro. “A portion
of the premium can be allocated as an
allowance towards any risk prevention training
or services that the client wishes to undertake
to improve the underlying ‘people’ risk.”
Hostile environment training, safe travel
management, incident management
workshops and country risk information are
just some of the mitigation services typically
employed. Not only does this proactive
approach mean a company is addressing their
duty of care obligation to their employees but
it also ensures that, in the event of a crisis, the
company can react fast and effectively – thus
mitigating the risk of brand and reputational
damage as well as the financial repercussions
of this.
Higgins of Arcfyre Group believes that
education is key. “Companies need to
ensure they have the correct educational
programmes in place to equip staff to
understand the risks of travelling in and
around the African continent.”
But what should you do in the event of a
K&R? How do you prevent becoming a
victim? Higgins says this is where a proper
crisis management programme comes in.
“I think it’s fundamentally important that
individuals who are travelling on behalf of
their company know that there is someone at
the other end of the line who has their best
interests at heart.”
“Africa is a beautiful continent, but when
things go bad, they go bad very quickly.
It’s important to understand what the
risks are and how to avoid them,”
Higgins concludes.
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