The containership Ever Given which had blocked the Suez Canal since 23 March, has been partially refloated according to the Suez Canal Authority, thanks to intense salvage operations involving eight tugs, diggers and a suction dredger. The ship has been secured and is being inspected for any damage.
The Ever Given is one of the larger containerships with a capacity of 20,000 teu. In the marine market, cover is divided between hull and machinery cover for the ship itself and third party liability cover from a P&I Club.
In the case of Ever Given, the hull and machinery policy is placed with Japan’s MS&D Insurance Group and sources suggest around a US$100m to US$140m total value – a small claim likely on the policy; as for the P&I cover this has apparently been purchased by the ship’s owner Shoei Kisen with The UK Club – see their statement here on their exposure. This will be reinsured around a significant number of reinsurers.
An investigation into the events leading to the grounding will commence with the Suez Canal Authority, the ship owners and the ship manager (Bernard Schulte) all making their own investigations and the data in the ship’s equivalent of a “black box” called a Voyage Data Recorder will be crucial. Whether it was the wind or human error or mechanical failure will come out in time. Under the Suez Canal's rules of navigation, the master of the vessel is responsible for any accident that takes place, rather than the pilots navigating them through the canal.
Naturally, we have been asked by several Members what this event might mean for Lloyd’s and clearly this is going to be a very complex interplay of contending claims and looking at the possible areas for claims to arise, we have picked out the following:
- The hull of Ever Given may be somewhat damaged following the grounding and subsequent salvage work – hopefully a small claim only pending the ship continuing on its way;
- Salvage costs – SMIT Salvage will be able to claims for its time and costs – these are covered by the hull insurer – this event did not involve salvaging a wreck as happened with Costa Concordia and so should be significantly less;
- Delay cover – Lloyd’s List reported last week that this cover will only kick in for those vessels that have taken out cover – that is likely to apply to perhaps 1 in 10 apparently of the delayed vessels;
- Compensation for damage to perishable goods – it seems Ever Given’s power was operating and so little damage should have taken place;
- Damage to the Suez Canal and claims by the Authority for loss of income – would be covered by the P&I club.
Up to 400 other vessels (bulk carriers, crude tankers, containerships, vehicle carriers) are stalled waiting to pass through the Suez Canal once Ever Given is completely freed. It will according to the Suez Canal Authority take some days to clear but the disruption to supply chains will last several months with many consequential effects on worldwide supply chains. . See live marine map here.
Fitch Ratings in a report available here has estimated that insurance and reinsurance claims would likely reach several hundred € millions, an earnings event rather than a capital event but certain to affect premiums.
With the re-floating of the Ever Given, the worst case loss fears have eased. However it has reminded the market for the potential claims that can arise in this region, which can be magnified by global supply chains which operate with little margin for error.