Malaaca Strait security: Time for insurance rate changes?

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As Indonesia and other Southeast Asian states tighten security in the Malacca and Singapore straits, one of the world's key waterways for international shipping, pressure is growing for insurers to withdraw a controversial rating that classed the channel as a war-risk zone threatened by both pirate and terrorist attacks.

In a series of steps over the past 18 months, coastal states flanking the 600-mile long straits have taken more effective measures to guard against piracy and terrorism. Only two cases of piracy were reported in the straits in the third quarter of 2005, compared to eight attacks recorded from January to June. This has not only led to the new demands for lower insurance rates; it is also providing reassurance to China that the U.S. military will not be directly involved in securing a maritime artery that carries about three quarters of Chinese oil imports.

As a result, Beijing appears to be taking a more relaxed attitude towards countries like India and Australia, which have close ties to the United States, taking part in patrols of regional waters with the agreement of Southeast Asian governments. And for the first time, Beijing has offered to provide aid to regional countries that want to improve their maritime safety and security.

Singapore shippers say that the risk of terrorism in straits has eased and they are campaigning to persuade the organization in London that sets guidelines for marine insurance to remove its war-risk rating. The classification, announced last June, led to higher insurance premiums for vessels passing through the waterway, which provides the shortest route to and from Asia for international shipping between the Indian and Pacific oceans. In some cases, ships were having to pay an extra US$5,000 per trip. As many of them pass repeatedly through the straits, this amounted to a hefty surcharge.

What? You didn't know piracy involved the great dance of powerful countries? You do now.