The movie, Pirates of the Caribbean,made light of piracy but maritime crime has a significant economic impact.
About 50 percent of the goods that trade globally travel by sea, according to the United Nations Conference on Trade and Development (UNCTAD)’s 2014 report, Maritime Piracy. It estimated the economic costs of piracy – including ransoms, insurance, re-routing ships, security equipment and guards, naval forces and military operations, counter-piracy organizations, and other factors – at $7-12 billion in 2010.
During the first half of 2016, however, the cost hit a two-decade low. The Economist reported:
“The recent decline in global piracy can be attributed in part to better security on ships. For years, the UN’s International Maritime Organization discouraged boat owners from arming their crews. Ships tried in vain to defend against heavily-armed pirates using little more than diligent watch-keeping and water cannons. In the mid-2000s, facing rising insurance and ransom costs, shipping companies began employing private security contractors. These firms are increasingly supplied by “floating armories” to help evade laws that bar crews from bringing weapons into territorial waters…Better policing of the high seas has also played a part.”
In 2010, governments and marine insurers identified high-risk shipping areas. Not long after, floating armories were established and became a type of temporary agency for armed guards on the high seas. The Economist reported, “At the peak of Somali piracy in 2012, ship owners would pay about $45,000 per trip for armed guards.” When they weren’t on a client’s ship, guards returned to the floating armory until employed by another merchant ship.
Floating armories are experiencing some growing pains, as have many fledgling industries before them. Piracy is down, and so is demand for their services.