Insurance companies on hook for millions tied to Suez Canal crisis

Insurance companies on hook for millions tied to Suez Canal crisis
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There were potentially thousands of insurance policies taken out on the steel boxes stacked high on the massive boat blocking the Suez Canal and upending world trade. They could result in millions of dollars in payouts — but first, a game of passing the buck.

Taiwan’s Evergreen Line, which chartered the Ever Given, says Japan’s Shoei Kisen Kaisha — the ship’s owner — is responsible for any losses. The shipowner has taken some responsibility but says charterers need to deal with the cargo owners. The Suez Canal’s own policies suggest it’s not to blame, even if its pilots were at the helm of a ship that ran aground.

Regardless, the blockage is set to unleash a flood of claims by everyone affected, from those in the shipping industry to those in the commodities business. Owners of the goods on board the Ever Given and other ships stalled because the fastest waterway connecting Europe to Asia is closed will seek payment from their insurers, if they have one. And the insurers for cargo on board will in turn file claims against Ever Given’s owners, who will turn to their insurers for protection.

Meanwhile, Suez Canal salvage teams were alternating between dredging and tugging on Sunday to dislodge a massive container ship blocking the busy waterway, while two sources said efforts had been complicated by rock under the ship’s bow.

Dredgers working to dislodge the stranded vessel have so far shifted 27,000 cubic metres of sand, to a depth of 18 metres, and efforts would continue around the clock according to wind conditions and tides, the Suez Canal Authority (SCA) said in a statement.

Egypt’s President Abdel Fattah al-Sisi has ordered preparations for the possible removal of some of the ship’s 18,300 containers, SCA Chairman Osama Rabie told Egypt’s Extra News.

Among the things insured is the ship itself. That’s usually covered anywhere in the region of $100 million to $200 million, according to insurance broker and risk adviser Marsh. But the payout would depend on how bad the accident is. While the propeller could be damaged given the depth of the grounding, the sandy surfaces mean the damage could have been worse.

If a process called general average is declared — which involves sharing costs among all stakeholders — the payouts, which will be well into the millions, become incredibly complex.

“It adds a huge complexity to settling the final claim,” said Marcus Baker, head of the marine practice at Marsh. “And when I say a huge complexity, we’re talking years before we can get to a place where everyone knows there they stand.”

While major risk modelers aren’t putting out estimates yet, the eventual payout for the vessel will span a whole host of insurance sectors.

One entity directly involved is the U.K. P&I Club — one of thirteen mutual groups that insure third-party liability in global shipping markets. It covers the Ever Given for things like damage to infrastructure and claims for obstruction. The U.K. club said it will consider all valid claims in due course.

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