Monday, August 9, 2010

The Economics of Modern Piracy

Very interesting and detailed piece here on the economics of modern piracy. In the Golden Age, pirates would try to capture ships carrying valuable cargo so that they could actually sell the cargo. Now, if they take a tanker with $100M to $150M of oil, they know it's going to be too hard to actually sell the petrol, so they ransom it instead. Eventually, a third-party arranges to have a few million dollars dropped onto the boat via helicopter. The pirates take the money and flee, the owner gets his ship back, the oil company gets its petrol back, and the insurance company reimburses the client for the ransom.

The total amount of ransoms paid last year was reportedly around $50M.

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