Strait of Malacca to Retain ‘War Risk’ Zone Designation

August 18, 2005

The London insurance market’s Joint War Committee (JWC) has rejected the shipping industry’s complaints about its designation of the Straits of Malacca as a “war risk” area (See IJ Website Aug. 15).

At a meeting on Tuesday, Aug. 16, The International Chamber of Shipping (ICS) and Intertanko presented their views to the JWC. An ICS bulletin noted: “As a result of the JWC’s decision to include the Malacca Strait and certain areas of the southern Philippines in the Listed Areas, Asian ship owners and governments were particularly well represented. The JWC, acting on advice from its consultants, Aegis Defence Services Ltd., said the 500-mile (800-km.) long sea lane, which connects the South China Sea and the Indian Ocean between Malaysia and the Indonesian Island of Sumatra, would remain a high risk area.

The ICS bulletin summarized the findings as follows: “Aegis explained that the ports, places and coasts included on the list had been assessed by them to exceed an enhanced risk benchmark that they had established. Aegis had developed a threat assessment system which was updated regularly on a daily basis which they said enabled them to more accurately and specifically assess risk. The list was proactive rather than reactive looking principally to the future and to past trends only where relevant. Regular quarterly reviews would determine whether any additions or deletions were appropriate.”

The bulletin went on to note that “during the question and answer session that followed, shipowners and government representatives questioned the methodology employed by Aegis. It was suggested that in relation to the Malacca Strait, Aegis might have confused threat assessment with vulnerability assessment. Although the Strait was vulnerable, there had not been a single terrorist attack in the last 13 years.” The discussion also touched on the weapons build-up in the area and the high incidence of robberies, many of which are not reported.

In conclusion both sides agreed to keep the area under “close review.” The JWC “gave the clear message that it was incumbent on individual owners to negotiate appropriately with their underwriters.”

The ICS indicated that shipowners and governments had “urged the JWC to consult more widely, to review their position, and, during this time, to refrain from imposing additional premiums in the Malacca Strait.”

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