The Effects of Piracy on International Shipping Companies

Piracy affects the cost of international shipping in several ways. In most cases, pirates will scale the side of a ship carrying guns and grappling hooks. If the crew and captain are lucky, the pirates only take what they came for; in some cases they take the ship and hold the crew hostage or kill them.

Maritime Operations: Currently, there are only two shipping companies from the United States that are flying U.S. flags. This is partly due to the Maersk Alabama being attacked by Somali pirates. Ship crews are not permitted to carry guns, therefore, they are defenseless in most attacks of piracy.

Legal Impacts: Ship insurance does not include any illegal act, therefore, if a ship were to be attacked by a pirate and a person of the crew were to kill that pirate, the shipping company is solely responsible for all damages done, punishable by death if the family of the dead pirate sees fit. The United Nations has declared that no crewman is allowed to be armed while on duty.

Armed Guards: Hiring a second party of armed guards to cross international waters that are known for piracy is an option that a shipping company has, however, armed force in retaliation to piracy is not recognized by the United Nations or the International Maritime Organization. This means that a company can be doubly fined and charged from the government that controls the territorial waters as well as the family of the dead pirate.

Increased Insurance: Shipping companies that provide insurance will not pay for armed guards, but they will pay for a ship that has been lost to a hijacker. These insurance companies will not pay for a crew's ransom but they will pay the death benefits of a deceased crew member. Lost profits of a hijacked ship are considered a misadventure. This means that insurance rates will increase with each successful voyage as well as each loss a company sees.