Cargo insurance policies may vary in terms and conditions when it comes to protecting an exporter's cargo from a pirate hijacking. It is always wise for exporters to consult with their insurance agent or broker, the insurance company and legal counsel to insure proper policy terms and conditions.
Cargo aboard a ship that is attacked or hijacked by pirates may be at risk of damage. Most cargo policies will provide insurance for goods that are damaged as a result of the hijacking. Therefore, if containers are opened and sensitive electronics are exposed to moisture during the hijacking, the exporter's cargo insurance policy may provide coverage.
However, it is unlikely that a cargo policy will cover the loss if it is due to a delay and the goods are not damaged. Therefore, seasonal goods that arrive after the fact due to a hijacking could end up being the exporter's headache.
Food poses a unique risk. An all-risk cargo policy may cover food that spoils as a result of a pirate hijacking, but other types of cargo policies may require special provisions to address how this would be insured.
Under the General Average Act (York-Antwerp Rules), cargo owners may also find themselves liable for part of the ransom payment made to the pirates by the ship owner. A ship owner may find it necessary to pay a ransom to the pirates for the joint benefit of the ship, the cargo and the crew.
If this occurs, then under the General Average Act, the exporter may be required to contribute a pro-rated portion of the ransom payment.
With most paid ransoms in the Gulf of Aden in the range of $1-to-$3 million per ship, it's good to know that the exporter's ransom payment may be covered under the exporter's own cargo policy, instead of relying upon the freight-forwarder's or customer's policy which may not apply.
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