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Wednesday, 17 October, 2001, 14:45 GMT 15:45 UK
Pakistan war insurance plea
A villager walks through a drought-stricken part of Pakistan
Drought-hit Pakistan exports mostly agricultural goods
War-risk insurance charges imposed on shipments to and from Pakistan are unfair and threaten the country's economy, the government has said.

The extra charges are "totally uncalled for and unjustified" as Pakistan is not at war, said Javed Ashraf, Minister for Communications and Railways.

And he revealed that government officials will seek a meeting with insurance market Lloyd's of London to ask its member firms not to impose the charges.

Meanwhile, the Pakistan government is considering stepping in as insurer of last resort for shipments to the country.

State guarantees

US and British naval flotillas in the Arabian Gulf have been bombing Pakistan's neighbour, Afghanistan, in retaliation for the 11 September terror attacks by organisations thought to be based there.

Insurers imposed the war-risk charges because they feared shipments to Pakistan could become the target of reprisals by Islamic radicals.

To ease the cost of these extra payments the Pakistan government may guarantee shipments itself, the minister said.

"We are also thinking of giving a sovereign guarantee to all the ships visiting Pakistan," he said.

'Not at war'

He criticised the imposition of war-risk premiums on shipments to Pakistan as irrational.

"It is unfair to impose additional war-risk surcharges on shipments to a country which is not at war," he said.

"There is no naval war going on... Afghanistan is a landlocked country," he added.

If anything, Pakistan's ships are safer than before because they are protected by the presence of US naval ships in the Arabian Gulf, he argued.

"US naval ships are sitting on the Arabian sea and they are our allies. So where is the threat to ships?"

Lloyds meeting

Lloyds Underwriting Association, which represents about 30 marine insurance syndicates, denied that Pakistan was being singled out.

"Everywhere in the world has higher rates charged to them. It's not just Pakistan," Neil Smith, secretary of the association's War Risks Committee told BBC News Online.

Mr Smith said the committee met Pakistan's ambassador to London on 16 October but declined to give details of what was discussed.

"There is an understanding of each other's positions," he said.

The committee assesses countries for risk.

After 11 September, it categorised Pakistan as needing 'trading warranties', meaning that shippers must inform their underwriters of every cargo rather than relying on annual insurance cover.

However, the committee does not set the level of insurance premiums or determine the mark up for war risk.

"It's a free market. If an underwriter is overpricing for risk, then the broker will take it to another underwriter," said Mr Smith.

Marine underwriters' policies insure both the ship and its cargo in transit within Pakistan, he said.

Economic pain

Mr Ashraf criticised the "unnecessary burden which commodity imports and exports are having to bear".

Pakistan's major exports are mostly agricultural goods - cotton textiles, rice and leather.

The war-risk surcharges also threaten to make imports more expensive and hurt the country's economy, he said.

"Now that traders are paying these extra costs, it will make things expensive in our market and squeeze their profit margins."

Three international shipping lines suspended sailing to Pakistan when war-risk charges were imposed earlier this month, but have since resumed shipments.

The three were Hyundai Merchant Marine of Japan, Korea-based Wanhai line and Orient Overseas Container Lines of Hong Kong.

London visit

Delegations from the shipping industry have already held meetings with insurers at Lloyd's of London, but Pakistan has now decided to send government officials, according to Mr Ashraf.

"This time we are including government officials in the delegation to explain the government's viewpoint. We can only hope they will see reason," he said.

The battle over Afghanistan has not disrupted work at Pakistan's main port, Karachi, he added.

Pakistan's predominantly agricultural economy has been hard-hit by drought.

The country's proximity to Afghanistan, and anti-US street protests, have already forced the government to postpone the bulk of its privatisation plans for this year as Western firms were unwilling to send staff to Pakistan.

See also:

04 Oct 01 | Business
26 Sep 01 | Business
24 Sep 01 | Business
24 Sep 01 | Business
23 Sep 01 | Business
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