Suez Canal blockage to cost reinsurers hundreds of millions of dollars
Suez Canal blockage to cost reinsurers hundreds of millions of dollars
The blockage caused by the grounding of the Ever Given held up an estimated $400 million per hour in international trade. Insurers are expected to cover up to $100 million.
3 min read
The Ever Given is one of the largest container ships in the world. [Getty]
Reinsurers could be looking at costs running into hundreds of millions of dollars following the wedging of a vessel in the Suez Canal, which halted international trade for nearly a week.
Ships typically have protection and indemnity (P&I) insurance covering third party liability claims, including environmental damage and injury.
Alan Mackinnon, chief claims officer with UK Club, the Ever Given’s P&I insurer, told Reuters it expected a claim against the ship’s owner from the canal authorities for possible damage to the canal and for loss of revenues.
"I expect we will get a claim from the Egyptian authorities quite soon and the claims from the other shipowners will trickle in over the coming months," Mackinnon told Reuters.
The blockage held up an estimated $400 million per hour in international trade, according to the German insurer Allianz.
The UK Club will cover the first $10 million of P&I losses while the wider pool of P&I insurers will cover up to $100 million. Reinsurers such as Lloyd’s of London could face up to $2.1 billion of claims.
"This is not an existential moment for the P&I sector. It may be a large claim, but we are structured to deal with large claims," Mackinnon said.
Read also: Before the Ever Given: A look at the crises that closed Suez
Suez Canal Authority chairman Osama Rabie said earlier this month that the exact amount would be calculated after an investigation was conducted, but gave no indication as to when the process would be completed.
International trade was thrown into disarray when the 400-meter-long Ever Given ran aground in the canal on March 23.
Twitter Post
|
A specialist rescue teams took six days to clear the passage, while some among 400 vessels affected by the canal’s closure circumnavigated Africa to get supplies to global markets.
Analysts at the insurance firm DBRS Morningstar told Reuters that total insured losses "will remain manageable given the relatively short period of time that the canal was blocked".
The causes behind the unprecedented shutdown, which added to the strain posed by the pandemic on the shipping industry, have yet to be ascertained.
Egypt's first female ship captain, Marwa Elselehdar, was the topic of a false internet rumour that accused her of blocking the Suez Canal.
Investigators are currently analysing the Ever Given's black box, which is expected to provide an explanation for the unlikely grounding.
The incident will likely result in years of litigation to recoup the costs of repairing the ship, fixing the canal and reimbursing shippers for the disruptions.
The multiplicity of actors involved in managing the mammoth cargo ship – owned by a Japanese firm, operated by a Taiwanese shipper and flagged in Panama – is also expected to complicate liability claims.
Follow us on Facebook, Twitter and Instagram to stay connected
More In News
