This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Pirates' Toll: Insurance and Razor Wire

Stocks in this article: GMR OCNF GNK NMM DRYS

This is the second part of a four-part series on the rise of hijack-and-ransom piracy in the shipping lanes off the coast of Somalia, and the costs it poses to the merchant shipping industry and, perhaps, global trade as a whole.

>>The Pirates' Toll, Part 1

>>The Pirates' Toll, Part 3

>>The Pirates' Toll, Part 4


Within the insular maritime-shipping community, disagreement reigns on the question of whether Somali piracy has levied any real cost on the business of moving goods across the oceans -- or whether it threatens to do so. The answers depend on who you talk to, and the more they talk, the more the notion of risk elides.

"It's no big deal -- insurance covers it," says the shipping investment specialist at a well-known New York fund.

"Put it this way: shipping companies aren't overly concerned about rising costs because of piracy," says the shipping-industry stock analyst at Jeffries & Co.

The maritime lawyer says: "It's putting a lot of pressure on costs at a time when the market is still quite depressed from where it was 18 months ago. Either you pass on those costs or it drops to the bottom line."

Pirate Interactive Map

Says the stock analyst at Oppenheimer: "The direct costs are fairly minimal. You just hope you don't get hit."

"The insurance industry hasn't completely got its hands around it," says the industry consultant.

"Piracy costs were thought to be a 'cost of doing business' that owners, insurers and their customers could absorb. That view appears to have changed," says the insurance-industry trade publication.

"This whole thing is costing the industry billions," says Per Gullestrup, CEO of the Clipper Group, which had a ship captured in 2008.

"The financial impact is not that significant," says Ion Varouxakis, CEO of FreeSeas, a dry-bulk shipping company that has never experienced a hijacking (though one of its carriers managed to evade an approaching boatload of pirates in the Gulf of Aden about a year ago).

The hostage crisis James Christodoulou supervised for 56 days between Thanksgiving 2008 and late January 2009 has transformed him, a year later, into a bankable expert on all things piracy. In the aftermath of the hijacking of his company's ship, the MV Biscaglia pictured above , (a story first told in The Wall Street Journal days after the ship's release), his expertise has become almost a second career.

He recently gave a presentation at NASA. Topic: crisis management. His fame arguably reached its height during the Maersk Alabama drama of April 2009; he spent a lot of time in the Manhattan green rooms of cable all-news channels; he was a virtual sidekick of Shepard Smith. Larry King had him on twice. Christodoulou is also a frequent speaker at shipping conferences, where he sits on panels and keynotes seminars, and lectures in front of ballrooms full of maritime executives. He talks about anti-piracy measures, he says, "and about what we did, what our best practices were, and how best to deal with piracy."

1 of 5

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs