Reinsurers Will Bear Most of Costs of Container-Ship Grounding in Suez Canal

Reinsurers Will Bear Most of Costs of Container-Ship Grounding in Suez Canal

2021-04-08 14:05:38

LONDON – Reinsurers will pay most of the bill for grounding the ship that stopped traffic in the Suez Canal, industry sources said, with payouts expected to be in the hundreds of millions of dollars.

International supply chains were confused when the 400-meter (430-meter) Ever Given grounded in the canal on March 23, requiring specialist rescue teams nearly a week to free the ship.

About 400 ships were affected by the canal's closure, prompting some to divert around Africa to get supplies to world markets.

Ships typically have Protection & Indemnity (P&I) insurance, which covers third party claims, including environmental damage and injury. Separate hull and machinery (H&M) policy covers ships against physical damage.

Alan Mackinnon, chief claims officer at UK Club, Ever Given's P&I insurer, said it was expecting a claim against the ship owner from the channel authorities for possible damage to the canal and for lost revenue, and separate claims for compensation of some of the owners of the delayed ships.

"I expect we will get a claim from the Egyptian authorities pretty soon and the claims from the other shipowners will trickle in in the coming months," Mackinnon told Reuters.

Osama Rabie, chairman of the Suez Canal Authority, said last month that the losses and damages from the Ever Given blockage could amount to about $ 1 billion, but the actual amount would be calculated after the investigation, although it was unclear. when this would be completed.

Read more: Egypt seeks an out-of-court settlement with owners of a massive ship that blocked the Suez Canal

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

That aside, the larger pool of P&I insurers will cover up to $ 100 million, at which point reinsurers like Lloyd & # 39; s of London step in for up to $ 2.1 billion in claims. P&I insurers would contribute a share of another $ 1 billion in coverage.

When asked if claims could reach the highest coverage levels of $ 2.1 to $ 3.1 billion, the UK Club's Mackinnon said, "We are convinced that we are not in that area at all."

“This is not an existential moment for the P&I sector. It may be a big claim, but we are structured to handle big claims. "

Analysts at DBRS Morningstar said total insured losses "will remain manageable given the relatively short period of channel lockdown."

Lloyd & # 39; s of London said last week that the incident would likely result in a "major loss" to the commercial insurance and reinsurance market of at least $ 100 million.

Yumi Shinohara, deputy manager of the fleet management division at Shoei Kisen of Japan, the owner of Ever Given, said it had not yet received any damage claims.

Container ships the size of the Ever Given usually have H&M insurance limits of $ 100 million – $ 140 million, brokers say.

An insurance source in Tokyo, who declined to be named, said the three Japanese H&M insurers would pay for salvage costs and any hull repair costs. Mitsui Sumitomo Insurance, the main Japanese hull insurer for the ship, declined to comment.

Other insurance sources said Japanese hull insurers would also 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)

Photo: The Ever Given container ship is shown here on Wednesday, March 24, 2021 after becoming trapped over Egypt's Suez Canal and blocking all traffic on the vital waterway. Photo credit: Suez Canal Authority via AP.


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