Piracy in the Gulf of Aden and off the coast of Somalia has for some time now been the subject of considerable publicity, most recently in the United States with the rescue of an American sailor by the U.S. Navy. Beyond public interest, however, the increase in piracy activity has had a very real impact on the insurance industry and those international shipping companies that may have previously considered insurance coverage for losses associated with piracy to be nonessential.

The dramatic increase in the frequency and unprecedented reach of piracy in one of the most active shipping routes in the world has resulted in an increase in both the demand for marine insurance and Kidnap and Ransom insurance (“K&R” insurance), and the cost of such coverage. The increase in insurance claims for piracy losses can also be expected to trigger a rise in disputes among insurers over whose policy, if any, covers ransom.