Analysis of Navy Insurance - Essay Example

Modern-day events have increased pressure on marine operators to adopt comprehensive coverage against such risks as the risks posed by piracy among others.

It is estimated that the piracy menace costs the international community an estimated annual average of US$ (4.9) on the lower side and US$ (8.3) billion on the higher side (Askins 2). The recent rise in costs of operating marine trade and business through losses suffered through piracy has necessitated players in the industry of marine business to invest in piracy insurance policies. According to UNCLOS (United Nations Convention on the law of the Sea), piracy is a multifaceted issue and takes cognition of all illegal acts of detention violence as well as depredation that is directed towards ships or persons, or even cargo on board the ship on the high seas.

With the rise in piracy risks on the high seas, the emerging trend has been the insurance brokers offering marine insurance against piracy at very high premiums as compared to other risk premiums in the 21st-century marine business. In particular, the premiums on offer depend on the routes of the voyage, as the insurers are aware of the most affected regions by piracy such as the east African shores, especially within the shoreline of Somalia. Besides, the international community has invested notably in deploying military personnel to aid in restoring normalcy in the areas facing such challenges of piracy activity though this has had little effect in influencing the premiums concerning insurance against piracy.

Nevertheless, an emerging trend reveals efforts by insurance companies to fund operations by specialized naval ships, which are specially designed and made to have the necessary equipment as well as machinery that would be used to escort cargo ships across piracy risk-prone areas at relatively minimal costs. In particular, companies invest in naval assurance practices through the guidance of the international maritime organization. The IMO operates under a framework that is referred to as the SOLAS (Safety of Life at Sea Convention) which exempts the warships from the strict rules guiding the insurance practices in marine activity.

This system, therefore, guides the Lloyd register on safety assurance for the naval ships. The Lloyd register specializes in offering cover for persons and property and has a special provision for military ships. This in extension, therefore, has special attention towards the risks posed to naval ships by piracy activities within high seas. The IMO, therefore, provides a guideline on coverage concerning insurance provisions towards the navy ships by such a company as the Lloyd register (“All About Shipping” para 1-4). However, as concerns naval insurance, little effort has been put in. The IMO has been instrumental in guiding the future of insurance companies and their operations regarding navy ships. The Lloyd register is such an example of a company whose operations take recognition of navy coverage.