Why Would a Pirate Ship Want Insurance?

The bizarre case of the self-sunk illegal Thunder and recent research show that insurers still cover illegal fishers, to the illegal fishers’ benefit.

The Thunder continues to take on water.
The Thunder takes on water.

Simon Ager/Sea Shepherd Global

A year ago, the Thunder, a Norwegian-built trawler with a long record of illegal fishing, glided to a stop in a lake-flat sea off São Tomé in West Africa in perfect weather. Then it slowly sank. It was being pursued by the Bob Barker, whose crew had witnessed the Thunder using banned bottom gillnets near Antarctica for the prized Antarctic toothfish, marketed in America as Chilean sea bass.

“We were astounded,” said Peter Hammarstedt, Bob Barker’s captain and a member of the Sea Shepherd Conservation Society, a marine wildlife conservation nonprofit. The Bob Barker had chased the Thunder for three and a half months to prevent it from unloading its catch. Apparently, the skipper’s crew, perhaps on instructions from the owner, decided to send the evidence to the sea bottom to avoid prosecution for illegal fishing.

The Thunders crew stepped into life rafts and were pulled aboard the Bob Barker. Then members of Hammarstedt’s crew boarded the sinking ship and collected evidence to prove that the destruction was voluntary. “All the hatches and doors were latched open, exactly the opposite of what you’ll do if you want to maintain buoyancy,” Hammarstedt said. The boarding party returned with a frozen toothfish, Antarctic charts, mobile phones, false papers, illegal nets, a laptop, and the Thunder’s registry. “Clearly, the skipper hadn’t planned on our boarding, or he wouldn’t have left so much stuff,” he said.

When the Bob Barker reached the port of São Tomé, the Thunder’s crew was turned over to the authorities. The Chilean captain, Luis Alfonso Rubio Cataldo, and two Spanish officers were convicted in a local court of sinking the vessel, sentenced to two to three years in prison each, and fined $15 million in total. Interpol estimated in 2013 that the Thunder had already earned $60 million illegally fishing toothfish in the Southern Ocean since 2003.

What’s particularly strange about this case is that the ship owner tried to collect insurance dollars for the Thunder, a pirate ship that had changed names, owners, and flags numerous times, and had been wanted by Interpol since 2013. The Thunder did in fact have insurance, by the 150-year-old British Marine Ltd. in London in 2011, and then by Murimar Seguros, a Spanish company, according to a Norwegian newspaper report by Kjetil Saeter, a Norwegian journalist writing a book about the case. The owner of the Thunder, a Panamanian shell company believed to be controlled by a Spaniard named Florindo Gonzalez, had filed a claim for the value of the ship, which the insurer declined to pay, Saeter wrote. The insurer, Murimar, did not reply to a request for comment.

British Marine had also insured five other Interpol-wanted pirate ships that had been hauling in toothfish with illegal gear for years, a group that, with the Thunder, Sea Shepherd called the Bandit 6. Screenshots taken from British Marine’s website on April 8, 2015, two days after the sinking of the Thunder, show that the company was still insuring the other five Bandit 6 ships, although that registration disappeared later that April, after the Norwegian report appeared. The controversy put a spotlight on the insurance industry, much of it based in London, prompting calls that insurers should refuse to cover ships with a record of breaking laws. Most insurers have clauses that allow them to dismiss claims for costs that derive directly from an illegal activity—though they typically honor other claims as long as the illegal activity occurs in another time and place from whatever caused the destruction, said Mercedes Rosello, a former legal adviser for the insurance sector who is now conducting Ph.D. research on illegal fishing.

Illegal fishing is still a huge problem in many parts of the world—it can have devastating consequences for the oceanic food chain while also removing an important economic and nutritional source from the local population, said Daniel Pauly, a fisheries scientist at the University of British Columbia. Pauly recently concluded a catch reconstruction study of the past 60 years that found far more illegal catches than had been believed; in West Africa, for instance, the illegal catches were estimated at 80 percent of the total fish caught off the coast there. Often, registered fishing boats supplement their income by fishing illegally, though there are ships like the Thunder that are almost entirely illegal. A recent study concluded that between a fifth and a third of the seafood consumed in the U.S., representing about a tenth of the global seafood consumption, was caught illegally.

When industrial fishing ships started netting toothfish in the Southern Ocean in the 1990s, more than half the catches were illegal, causing some stocks to plummet. Eventually, the countries in whose waters the poachers operated—France, South Africa, the U.K., Australia, and New Zealand—sent their navies out to chase away the illegals into international waters. But that’s something few African countries can do. As of last year, the Bandit 6 group remained—willing to take risks because of the huge profits involved, according to Martin Exel, chairman of the international Coalition of Legal Toothfish Operators, based in Australia. The toothfish, a remarkably ugly top predator that weighs upward of 200 pounds, lives in waters too cold and deep for sharks. It has a bland, fatty meat that provides a perfect canvas for top chefs to display imaginative flavorings, which makes it one of the world’s most valuable species and a favorite at high-end restaurants. In order to sustain healthy populations and maximize yield, no more than 3 percent of the toothfish population is taken each year.

Reducing poachers’ access to insurance might be one way to combat illegal fishing. Insurance is critical to fishing ships because the loss of a vessel is an extremely costly burden for most operators. “Most fishing isn’t very profitable,” said Rashid Sumaila, a fisheries economist and head of research at OceanCanada. “Toothfish is an exception.”

If the Bandit 6 could get insurance, it seems almost any ship could. The boats’ listings showed that three of the Bandit 6 had no known flag, making them potentially stateless, and two lacked International Maritime Organization identification numbers.

“That’s not unusual,” said Dana Miller, a marine scientist at the University of British Columbia, who led a study published last month that found that blacklisted vessels seem to be insured just as often as nonblacklisted ones. The data, to the investigators’ surprise, suggested that blacklisting did not deter insurers from granting coverage. “With all of the media coverage of the pursuit of the Thunder by Sea Shepherd, it was just crazy to me that these contracts were not immediately dropped,” Miller said. (Since the Thunder sank, Indonesian authorities blew up and sank another member of the Bandit 6, the Viking. The other four—Perlon, Kunlun, Yongding, and Songhua—are being held in various ports after most were chased by Sea Shepherd vessels.)

The European Union has made it a crime to aid and abet illegal fishing, including insuring it, but still leaves it up to its member countries to set penalties. Spain, long the region’s main scofflaw, enacted a strong law two years ago that makes it illegal for a Spanish citizen to profit from illegal fishing. Thanks to that law, Antonio Vidal and several relatives, owners of three of the Bandit 6, are now awaiting trial in Spain. The owners of the other three ships, including the Thunder, have not been charged. The Spanish authorities are believed to be waiting to see the outcome of the trial before going after the other owners.

In London, where marine insurance was invented and which remains its global center, Jane Rumble, head of the polar regions department at the Foreign and Commonwealth Office, wrote in an email that her ministry had been “actively reminding British-based insurance companies” that covering “vessels identified as having engaged in illegal fishing is in violation of EU regulations.” She added that “insurance companies need to exercise due diligence” and consult the relevant blacklists before taking on new cases.

British Marine, the company that had previously insured the Thunder, was founded in 1876 and does 90 percent of its business outside Britain, specializing in smaller ships. It was acquired by QBE, Australia’s largest global insurer, in 2005. In 2009, it won a Lloyd’s List Global Award for providing “an insurance service of exceptional quality.” The company declined to comment or answer questions, instead issuing a statement through Sandra Villanueva, senior media relations manager for QBE’s European operations: “QBE adheres to strict policies with regard to the status of the vessels we insure and we are in regular contact with the relevant international authorities to ensure that those policies are upheld and any breaches are dealt with accordingly,”

The main blacklist, curated by the Trygg Mat Foundation, a Norwegian nonprofit focusing on sustainable seafood, is restricted to the worst offenders—like the Bandit 6—caught in international waters that are administered by regional fishing organizations. But this blacklist has only a few hundred names, according to Dyhia Belhabib, of the University of British Columbia, who has been studying illegal fishing for years, notably in West Africa.

“That’s just the tip of the iceberg,” she said. Belhabib is compiling a list of the far greater number of vessels that have been sanctioned by governments for fishing illegally inside their waters. Among the first 1,000 vessels she found, only 90 were on the Trygg Mat list. “Some vessels have only been sanctioned once,” she said. “Some have been fined many times or have flags of convenience and they don’t have registration numbers.” (Flags of convenience are issued by countries such as Panama or Liberia, which register ships that don’t operate inside their waters. They’re often used in conjunction with shell companies to hide the true owners of the ship, which makes them hard to prosecute.) When Belhabib’s list is complete, it will be posted online. “Insurance companies can easily check it and make their own judgment as to whether they want to support illegal fishing,” she said.

Miller, the lead author of the study on insurance and illegal fishing, said she has no plans to release the names of the companies that she caught insuring 67 blacklisted vessels. “We don’t want to name and shame, we want to talk to them about changing their policies,” she said.

Sumaila, the fisheries economist, estimates that losing their insurance would cause perhaps 40 percent of the ships that regularly fish illegally to stop doing so.

“The way to end illegal fishing is with death by 1,000 cuts,” said Rosello, the former insurance executive. “Making it very hard to get insurance would be a deep one.”