The marine insurance market is bracing for multi-million dollar losses as efforts to refloat the container ship blocking the Suez Canal continue amid fears the operation could potentially take weeks if the vessel needs to be unloaded.
- Claims likely from loss of revenue for the Canal Authority and rerouted vessels
- Hull damage and cost of refloating the ship
- Damage to cargo onboard Ever Given being examined
As this publication reported yesterday, the protection and indemnity (P&I) market faces losses stemming from the grounding of the 220,000-ton Ever Given, with any losses exceeding $100mn to be passed on to the International Group (IG) program.
The size of the loss to the marinw market is expected to directly correlate with the length of time the removal takes. Reports from the scene earlier today suggest the Ever Given – which is 400 metres long – cannot be pulled loose by tug boats due to the weight of the vessel, which is currently sitting heavy on the bank of the canal.
The Ever Given is entered into the UK P&I Club, one of 13 members of the IG which pool claims below the $100mn attachment point (see graphic).
Officials have suggested that cargo from the Ever Given may have to be removed in order to refloat the vessel, which would add further delays to unblocking the Suez Canal.
The Ever Given was understood to be travelling at capacity with containers stacked high.
In addition, the Suez Canal Authority is expected to claim for loss of revenue from the disruption caused, with market sources suggesting that these losses will ultimately fall on the ship owner.
There are currently understood to be at least 150 vessels accumulated on both sides of the Asia-Europe trade channel, unable to navigate the passage in either direction as a result of long tailbacks on the waterway following the incident.
If the anticipated disruption leads to ships needing to bypass the Suez Canal by travelling around the Cape of Good Hope – which can add another two weeks to the voyage from Asia to Europe – insurers face loss of revenue claims from the Suez Canal Authority as well as rerouting losses from diverted vessels, which could lead to additional costs anywhere between $10mn and $15mn per day.
In addition, the marine insurance market also faces losses from any damage incurred to the hull of the ship in attempting to refloat it.
While the impact to the cargo market from the incident is expected to be limited as policies largely exclude cover for delayed transit, depending on the length of delays, losses may stem from high-value, perishable or temperature-sensitive cargo which is particularly at risk of damage or reduced value.
Perishable goods policies – which are extensions to marine cargo policies that provide cover for physical loss or damage to items such as fruits, vegetables, flowers, meats and fish – could be triggered if vessels cannot access ports for an extended period and goods spoil.
Damage to cargo aboard the Ever Given is currently being assessed.
Roughly 10 percent of global trade passes through the Suez Canal, with the 193-kilometre (120-mile) canal one of the most trafficked waterways in the world.
The Suez Canal connects the Mediterranean to the Red Sea and provides the shortest sea link between Asia and Europe.
The Ever Given, registered in Panama, was bound for the port city of Rotterdam in the Netherlands from China and was passing northwards through the canal on its way to the Mediterranean.