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INSURANCE costs for ships using the Malacca Strait, the world's busiest sea-lane, may rise after it was declared a high-risk area for war and terrorism by an insurance body that advises members of Lloyd's of London.
Premiums, which vary according to underwriter, ship type and other factors, may rise,'' Neil Smith, marine manager at Lloyd's Market Association, said by phone from London yesterday. Because of the general security situation in the Malacca strait, we felt it's an area that we cannot ignore.
The waterway was added to 20 other areas, including Iraq, Lebanon and Nigeria, deemed a security threat to shipping, according to a June 20 list from the Lloyd's Market Association's Joint War Committee.
Shipowners have to inform underwriters that they plan to navigate in the country's waters and additional insurance costs may be levied for seven days' cover.
The Malacca Strait was the second-most dangerous area for pirate attacks on ships last year, according to the International Maritime Bureau. Indonesia's oil-rich Aceh province has been subject to a separatist rebellion.
About 50,000 vessels pass through the Malacca Strait each year, according to the US government's Energy Information Administration.
Rising piracy in the strait increases the chance of a major event happening, Smith said. It's difficult to identify if these attacks are just armed robberies or if there are political motives behind them.
Lloyd's of London is the world's largest insurance market. Bloomberg
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