Student Research

The trading gamble : cargo security threats and their implications on the cargo insurance industry

A capstone project submitted to the faculty of the California Maritime Academy in partial fulfillment of the requirements for the degree of Bachelor of Arts in Global Studies and Maritime Affairs.

In Marine Insurance, the industry culture tends to avoid high risk red zones of the trading routes in the world, such as the waters off the coast of Somalia, Strait of Malacca, and the Niger Delta, in the Gulf of Guinea. In the United States, the main high risk zones are found in the New York, Houston, and Los Angeles counties. These areas are high risk zones for cargo insurance companies because of the high levels of piracy and cargo thieves in those areas. In the past, insurance companies have worked hand in hand with security companies to push against piracy and theft threats in a gun vs. gun type approach. However, in the current maritime environment, officials realize that this type of threat push back approach is not as effective as they once thought. The change in security thinking has seen authorities move from the gun vs. gun approach to a more economic and social development approach. The goal of this approach is to fight the threat of piracy and theft by focusing on improving government, the economy, jobs, and education from behind enemy lines. The insurance companies, in order to help the security companies, focus on developments that will indicate the future zones that will already be or have become the next high risk zones. This thesis presents a better understanding of the future of high risk zones and the reasons for them.