Munich Re sees piracy pushing up marine premiums

By Danilo Masoni

TURIN, Italy Jan 28 (Reuters) - Munich Re (MUVGn.DE) 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 said.

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.

Speaking on the margins of the conference, 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", he said.

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.

Redirecting ships to pass by the Cape of Good Hope could cost a big container ship about $1 million more in costs compared to going through the Suez Canal, he said. The additional premium for every voyage though the Gulf of Aden is worth a couple of hundred thousand dollars, he said.

A UN source, speaking to Reuters before the conference, said the increase in the costs of ship insurance could reach 0.5 percent of ship values, which are typically between $10 million and $100 million.

Insurance has yet to show any sign of falling despite January's easing in hijacking numbers, Mukandan said.

Luca Sisto, an official at Italian shipowners association Confitarma, said in a telephone interview the next few months will be crucial in reassessing insurance premiums.

Premiums could be reviewed depending on how the international naval mission goes and statistical reports on piracy acts and hijacking, he said.

The strong decline in fuel prices makes passing via the Cape of Good Hope no longer an "absurd" alternative to the Suez Canal, Sisto said.

(Editing by Elaine Hardcastle)