Reinsurers will bear most of the costs of the grounding of container ships in the Suez Canal

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THE BHARAT EXPRESS NEWS INSURANCE NEWS
THE BHARAT EXPRESS NEWS INSURANCE NEWS

LONDON – Reinsurers are expected to foot most of the bill for the grounding of the vessel that cut off traffic in the Suez Canal, industry sources said, with payments expected to run into the hundreds of millions of dollars. dollars.

International supply chains were destabilized when the 400-meter (430-yard) Ever Given ran aground in the canal on March 23, with specialist rescue teams taking nearly a week to free the vessel.

About 400 ships have been affected by the closure of the canal, forcing some to turn away from Africa to obtain supplies from global markets.

Ships generally have protection and indemnity (P&I) insurance, which covers third party liability claims, including environmental damage and personal injury. Separate hull and machinery (H&M) policies cover ships against physical damage.

Alan Mackinnon, claims manager at the UK Club, the P&I insurer of Ever Given, said he expected a claim against the shipowner from the canal authorities for possible damage to the canal and to loss of income; and separate compensation claims from some of the owners of the delayed vessels.

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“I think we will receive a complaint from the Egyptian authorities very soon and that the complaints of other shipowners will spread over the next few months,” Mackinnon told Reuters.

Suez Canal Authority chairman Osama Rabie said last month that loss and damage from the Ever Given blockage could reach around $ 1 billion, but the actual amount would be calculated after investigations, although it is not known when this would be completed.

Read more: Egypt seeks amicable settlement with owners of huge ship that blocked Suez Canal

The UK Club will cover the first $ 10 million in P&I losses.

Beyond that, the larger pool of P&I insurers will cover up to $ 100 million, in which case reinsurers such as Lloyd’s of London will cover up to $ 2.1 billion in claims. P&I insurers would contribute a portion of another billion dollars in coverage.

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When asked if claims could reach the top coverage levels of $ 2.1 billion to $ 3.1 billion, Mackinnon of the UK Club said: “We are confident that we are not in this territory at all.

“This is not an existential moment for the P&I industry. This may be a large complaint, but we are structured to handle large complaints. “

DBRS Morningstar analysts said total insured losses “will remain manageable given the relatively short period of time the channel has been blocked.”

Lloyd’s of London said last week that the incident would likely result in a “significant loss” to the commercial insurance and reinsurance market of at least $ 100 million.

Yumi Shinohara, deputy director of the fleet management department of Japan’s Shoei Kisen, owner of Ever Given, said he had not yet received any compensation claims.

Container ships the size of Ever Given typically have H&M insurance limits of between $ 100 million and $ 140 million, according to brokers.

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An insurance source in Tokyo, who declined to be named, said the three Japanese insurers H&M would pay the rescue costs and the cost of repairing the hull. Mitsui Sumitomo Insurance, the main Japanese insurer of the ship’s hull, declined to comment.

Other insurance sources have said that Japanese hull underwriters will evenly spread their exposure to reinsurers.

(Additional reporting by Yuka Obayashi in Tokyo, Patrick Werr and Nadeen Ebrahim in Cairo and Kirstin Ridley in London, edited by Rachel Armstrong and Jane Merriman)

Photograph: The container ship Ever Given is shown here on Wednesday March 24, 2021 after being stranded in Egypt’s Suez Canal, blocking all traffic on the vital waterway. Photo credit: Suez Canal Authority via TBEN.

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