Suez Canal expects to cost insurers $100 m

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A mega containership wedged in the Suez Canal is expected to cost $100 million loss to the owner and insurers.

The ship is stuck in the southern section of the canal, travelling northbound to Rotterdam from Yantian in China with about150 ships backed up since Tuesday evening and supply chain issues building every day.

Head of hull and marine liabilities at McGill and Partners, David Smith said the broker has heard figures as high as $100m in insured losses mentioned.

But he said other costs, including compensation for delays, loss of revenue for the Suez Canal Authority, potential damage to cargo and the costs of refloating the ship could be “even more expensive”.

Owned by Japanese firm Shoei Kisen and operated by Taiwanese firm Evergreen, the 220,000-tonne Ever Given ran aground in strong winds on Tuesday evening and blocked the canal from one side to the other. Efforts are underway again today to dislodge the ship, which has the capacity to carry 20,000 containers.

More than 10 percent of global trade passes through the narrow stretch of the Suez Canal at an average 51 ships per day. “The disruption will come with a hefty price tag, a figure of $100m has been mentioned by some in the industry,” Mr Smith said.

Allianz Global Corporate & Specialty (AGCS) said “ships face costly and lengthy deviations if the canal is not opened soon”. It added that it is a “particularly bad time for global supply chains”, with a worldwide shortage in chips for cars and computer manufacturers after last week’s fire at a manufacturer in Japan.

Reuters reported that Ever Given hull is insured in the Japanese market, while UK P&I Club said it covers the ship for protection and indemnity loss.

“For some time now the salvage industry has been warning that container ships are simply getting too big for situations like this to be resolved efficiently and economically. This incident may force shipbuilders, owners and cargo operators to sit up and listen,” Mr Smith said.

Russell Group said Ever Given could be carrying goods worth $89m, including $4m worth of clothing. It valued the goods that flow between Ever Given’s route at more than $40bn per year, adding that it is a key transport for integrated circuit ports to Europe.

Managing director at Russell Group, Suki Basi, said business interruption was the biggest risk posed by the Ever Given grounding, rather than damage to the vessel.

“The disruption highlights that global trade has become dependent on these mega ships, and how any disruption in trade routes can leave many organisations and their (re)insurers significantly exposed to business interruption risks.

Coming on top of the global pandemic and recent disruptions to global auto production caused by other events, this latest blockage shows that insurers and their risk partners increasingly need to follow the money when assessing their underlying connected trade risks,” he said.

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