A plan for maritime security regulation

This is why the private maritime security industry needs a regulatory strategy to survive competition and declining service quality, says freelance industry analyst Deo Delaney, who wrote this article while employed for the EU regional maritime capacity building mission to the Horn of Africa.

The once lucrative industry’s business model hinged on providing security to ships, as states were unwilling to address maritime piracy. At an estimated cost of $1bn, it saved the shipping industry some £4.4bn in ransoms, insurance, and re-routing fuel costs. The financial crisis has seen an end to high fees and, as an unregulated industry with low entry barriers, fierce competition has ensued.

Consequently, the willingness of ship owners to pay has dropped in tandem with the quality of the service provided with regard to such as the vetting of personnel. The absence of regulation is undermining the industry’s attractiveness and legitimacy.

Regulators have now awakened and the Security Association for the Maritime Industry (SAMI) has served as a vanguard of standards and as a public engagement platform. It has created a communal drive, supports a range of regulatory efforts, and its members represent 35% of signatories to the ICoC set of voluntary standards.

The question remaining is how effective can SAMI be as a regulator when members constitute to core of its existence?

A regulatory strategy is the only viable way to move forward but it should not be too driven by state nor industry but rather, a carefully aligned hybrid that increases firms’ chances of product differentiation while leaving states comfortable that they are within the law.

To implement a hybrid regulatory strategy, a range of techniques must be applied in a coherent manner to address the interest of stakeholders. These would include:

1 – Ship owners as the cash cows should coerce ports and flag states into accepting regulations which allow armed guards in their waters.

2 – States regulators should be persuaded that they save resources by outsourcing accreditation to private certification bodies yet retain ultimate enforcement authority. Insurance companies and large Private Maritime Security Companies (PMSCs) should accommodate small PMSCs and ship owners in their value chain through market quotas and customised insurance products.

3 – Large and established PMSCs should actively participate by being first to implement new or pipeline regulatory standards and mass market their actions, thereby serving as an example for the rest of the industry.

4 – Smaller ship owners and PMSCs should be induced to defect by being guaranteed affordable insurance premiums their budgets can accommodate.

As growth is once more on the horizon, thanks to the surge in commodity trade and new oil fields on the west coast of Africa, sea traffic will increase to meet new demand. There is no better time for the industry to move swiftly or miss the opportunity.