African maritime insurance more critical than ever as piracy surges

Maritime piracy in East Indian Ocean waters has returned after a decade of relative calm in this area, with Somali pirates launching renewed attacks on vessels routing past the Horn of Africa. This has once again highlighted the importance of marine re/insurance to assist ship and cargo owners, as well as African companies, in mitigating the financial risks associated with international shipping.

This increase in piracy comes off the back of the Israel-Gaza war, where Houthi militants from Yemen cited anti-Israel sentiment as the reason for attacking an Israeli vessel in the Red Sea shipping lane in October 2023.

 19th century Cape route in use again 

However, since then, indiscriminate attacks on all vessels using this route have rocketed, with many shippers abandoning this roue for safer waters. Around 12% of global trade normally passes through the Red Sea, but this has decreased by as much as 30% in recent months as a result of high-sea conflict.

One of the solutions being adopted by shippers is the reintroduction of the Cape of Good Hope shipping route, which sees vessels making a 31-day detour around the southern tip of Africa to bypass the Red Sea and the Suez Canal.

Aside from the shipping delays and increased operational costs associated with this change, the Cape route boasts unpredictable weather patterns and dangerous seas. This stretch of ocean is infamous for strong winds and rough sea conditions, which threaten the safety of both crew and cargo.

But probably the most significant danger this rerouting has produced is the renewed threat of attack from Somali pirates.

The Cape route takes ships past South Africa and up the east coast of Africa where Somali pirate attacks have steadily declined in recent years. Pirate attacks here peaked in 2011 when more than 200 attacks were recorded in a single year.

Although these waters have been mostly quiet since then, Somali pirates have taken advantage of the increase in Red Sea attacks, and begun targeting ships that are once again using this old trade route.

Attacks, hijacking on the rise

Attacks started in November 2023, with International Maritime Bureau (IMB) reporting that the first successful hijacking of a cargo vessel in the area after six years took place in December 2023.

The Africa Centre for Strategic Studies says its sources show that since late 2023, 133 incidents have been reported, including 14 vessels struck by missiles or drones and 18 vessels hijacked by Somali pirates.

The centre says that the disruptions caused by 'nonstate actors unbounded by international law and with access to stocks of standoff armaments pose fundamental challenges to Africa's security and economic development.'

 It notes that insurance premiums for shipping have surged, and that the spike in the costs of freight shipped to Africa has raised prices to consumers and businesses for almost every product that is imported or exported to and from the continent.

 Some estimates put the fuel cost alone of diverting container ships around Africa on the China-Europe route at an additional US$1 million per round trip.

 Re/insurance policies a vital safety net

Marine re/insurance is a critical aspect of global trade that protects against damages and losses to ships, cargo, crew and other maritime assets. Policies can also be tailored to protect masters, officers and crew against kidnap and ransom, and ships against illegal seizure, hijacking and damage from pirates, which includes missile strikes, capsize and sinking.

African businesses and multinationals operating on the continent rely heavily on maritime logistics for the transportation of goods and machinery. The renewed risk of piracy of Africa's coast, along with natural disasters and accidents at sea, continue to necessitate comprehensive marine insurance policies for African businesses.

Demand for marine insurance rising

According to Research and Markets' 2025 Marine Insurance - Global Strategic Business Report, the global market for marine insurance was estimated at US$29.6 billion in 2023. It is projected to reach US$33.7 billion by 2030, growing at a CAGR of 1.9% from 2023 to 2030.

The report states that this growth is driven by several factors, including the increasing volume of global trade, rising investments in offshore energy exploration, and the growing demand for risk mitigation in high-value cargo transport.

The expansion of international shipping routes, particularly in emerging markets, has resulted in a greater need for comprehensive marine coverage to protect against cargo loss, damage and liability. That includes the growing threat of East and West African maritime piracy.

It is imperative that local and multinational business operating in Africa that are reliant on imports and exports thoroughly assess the risk associated with shipping and adjust their risk profile accordingly.

A reinsurance broker familiar with the local risk landscape, particularly the constantly changing but ever-increasing threat of maritime piracy, can help businesses obtain comprehensive reinsurance cover for every eventually at sea.