Piracy Exclusion Clause
The piracy exclusion clause determines whether piracy losses in cargo and hull policies are excluded as a war risk or covered as a named peril in their own right, affecting premium and sublimits in high-risk areas.
- Clause type
- Exclusion
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Insurer
- Negotiability
- Market standard
Purpose
Piracy occupies an intermediate position in law and underwriting practice: under the Institute Cargo Clauses (A) it is a covered peril within the base cover, whereas under the narrower ICC (B) and (C), and in many hull policies, it is expressly grouped with war risks and thus dealt with separately through the Institute War Clauses. The piracy exclusion clause makes clear which of these two categorisations applies to a given event, and therefore whether it is included in the base cover or only insured against additional premium through a war risk extension.
Effect and limits
In sea areas classified as high-risk (such as certain stretches off West Africa or in the Gulf of Aden), insurers frequently require additional premium or their own sublimits for piracy risk, regardless of its underlying classification as a war or marine transit peril. As no dedicated marine cargo or hull coverage currently exists in the register, cov-yachtversicherung is referenced here as the nearest available object, even though the exclusion was originally developed for commercial sea transport.
Negotiation and practice
Shipowners and shippers with routes through sea areas listed as high-risk should clarify in advance whether, and on what terms, a piracy and war risk extension is available, since a short-notice route change or a newly designated risk area can lead to substantial premium surcharges.