Lloyd’s drops war rating on Malacca Strait

One of the world’s busiest and most hazardous shipping routes was yesterday declared to be winning its fight against piracy when Lloyd’s, the shipping insurer, dropped its war risk designation for the Malacca Strait.

Lloyd’s surprise decision, which will cut insurance costs for shipping lines using one of the world’s busiest sea lanes, came a year after the insurer incensed the shipping industry and regional governments by imposing the rating.

The Malacca Strait came to be regarded as among the world’s most dangerous sea lanes after a surge in piracy attacks after 1998, as the Indonesian economy deteriorated and Aceh rebels stepped up their military campaign.

However, the International Maritime Bureau, which tracks global piracy, said recently that attacks in the area had fallen to their lowest level since 1999. Lloyd’s said there had been a “significant improvement” in security along the 900km strait as Singapore and Malaysia increased naval and air patrols.

Malaysia, which last week called for the lifting of the designation, said it welcomed the decision, but added it would push for shippers to pay fees to use the Strait in an effort to help defray the costs of security. Lloyd’s said ships calling at north-east ports on the Indonesian island of Sumatra would still be subject to war risk insurance premiums. Aceh separatist rebels on Sumatra have been blamed for many of the attacks.

Syed Hamid Albar, the Malaysian foreign minister, said Malaysia, Singapore and Indonesia had spent heavily to improve security and that other nations should help foot the bill.

He said Malaysia “was trying to work on a co-operation plan to find a way where the user states are also made responsible”.

Countries such as Japan and China would be most affected by the proposal since 80 per cent of energy supplies to east Asia pass through the Strait. About 40 per cent of global trade is carried by the more than 50,000 vessels that ply the waterway annually.

In spite of the increased patrols, the IMB recently warned that piracy remains a problem, with four attacks in July and one reported so far this month.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.