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Original title: How does the insurance company compensate for the high bills incurred in the Suez Canal “ship jam” for 6 days?
Guidance: Under the global flow of goods, the Suez incident has also added a hardship to the insurance industry, causing the insurance industry to consider how to deal with the increasing risks of trans-oceanic bulk cargo transportation.
Egyptian President Abdel Fattah al Sisi held a ceremony to navigate the “New Suez Canal” on March 31 local time, presenting this “new waterway” as an expectation for the rebound of the Egyptian economy.
April 1 was the third day of navigation on the Suez Canal after the “ship jam” and the third day of lengthy negotiations on various insurance matters. Although today is April Fools’ Day, there is no joke about insurance and compensation. Transportation companies, freight companies, the Egyptian government, lawyers, insurance companies and other parties have joined the tug of war for compensation.
Under normal circumstances, the instigator of the vessel jam, the “Nagai” and the owners of other cargo ships will seek compensation from the insurance companies insured by their respective insurance companies, and the insurance company will sue instead. against the Japanese owner of “Nagai”, Shoei Kisen Kaisha. All claims, and the latter, there is a high probability that they can only seek compensation from other insurance companies.
In this “insurance claims series”, how to determine the key liability issues, who will pay what part, how much of their respective rights and interests, how efficient the processing will be, and what are the joint and several liabilities of all related. parties, each of these issues There is a high probability that there will be scenes of mutual accusation and circumvention.
Who will pay for whom?
In short, the Suez Canal century “ship jam” incident was that a giant container ship “Long Give” ran aground and blocked the Suez Canal, one of the most important shipping lanes in the world. Six days after the rescue, it was finally resolved. Smooth navigation.
Although the rescue only took 6 days, during these 6 days, the various expenses were not many and some of the expenses were staggeringly high. It can take years to figure out who will ultimately clean up this mess and who will pay for whom.
Shipping companies, insurance companies, the Egyptian government, and the lawyers involved have their own set of evaluation and judgment standards. In addition to determining the various issues and potential losses, they must also find out exactly where the problem lies, but at least it is certain that the insurance company insured by the owner of the “Long Give” will bear the brunt of the financial compensation. You are also very likely to take ultimate responsibility.
Since the “Long Grant” is a member of the P&I Club, the group’s P&I club has also insured the shipowner. Shipowner Shoei Kisen Kaisha is estimated to be able to receive around 3.1 billion from the association. Liability insurance in US dollars. But even if the insured amount is as high as US $ 3.1 billion, this amount is still a bit difficult compared to the high bills that accrued on the 6th. According to a Reuters report, industry experts estimate that the insurance premiums of the ship can be between 100 million and 140 million US dollars.
According to the introduction on the official website of the P&I Club, the group is made up of 13 member associations, which provide liability insurance for approximately 90% of the world’s shipping tonnage, and will share claims in cases of more than 10 million Dollars. There are also cases of the “Long Give” accident. Already in 2012, the cruise ship Costa Concorde collided with a rock and capsized, with the International P&I Club Group being responsible at that time. The International P&I Club has paid a total of nearly US $ 2 billion in compensation for pollution cleanup, shipwreck salvage, casualties, and hull insurance.
At present, the team of the German company that hired the crew and the insurance team of the shipowner have begun to investigate the cause of the “Long Grant” stranding; and because the ship was registered in Panama, the Panamanian authorities have also opened an investigation; in addition, lawyers and other related issues have been launched aspect investigators also joined the investigation team. Under the multi-party struggle, regardless of whether the final results of the investigation are consistent or not, the definition of liability issues will be complicated or take several years.
Insurance clearing alone makes the Suez Canal “ship jam” extremely complicated. In the event that the amount of the claim exceeds US $ 100 million, the reinsurance company responsible for underwriting risks for other insurers will also participate. However, the specific amount of the claim has not yet been officially calculated.
In this regard, P&I Club CEO Nick Shaw said that among the 25 largest reinsurance companies in the world, more than 20 support “Long Grant” coverage. The insurance company will decide together with the shipowner which clauses are valid and which are illegal. However, the organization also claimed that the ship and cargo are separately insured.
According to media reports, it is estimated that part of the $ 3.1 billion “Long Grant” liability insurance will be collectively assumed by members of the P&I Club, which can cover up to $ 100 million in claims. On this basis, reinsurance will raise insurance coverage to US $ 3.1 billion, and a further US $ 1 billion can be used to deal with oil and pollution incidents.
Rahul Khanna, Global Director of Maritime Risk Consulting at Allianz Insurance Company, responded to the 21st Century Business Herald that it is too early to determine the specific amount of the claim, but potential claims may include damage to the hull and engine (if there is a fault mechanics). , This is a common phenomenon in marine insurance claims). If the stern is also stranded, the propeller and its shaft will be damaged, and the cost of salvaging and removing the ship (especially in the case of wreck removal) will increase dramatically. In terms of liability claims, including damage to the canal, loss of perishable goods, and claims for business interruption and loss of income caused by the blockade.
Calculate the sky-high 6-day bill
The ripple effect caused by this time can lead to hundreds of millions of dollars in insurance claims, and the delay in the global supply chain will also cause more extensive losses.
As one of the busiest trade routes in the world, more than 50 ships pass through the Suez Canal every day, and this canal carries between 10% and 12% of the world’s trade volume. This includes energy products such as liquefied natural gas, crude oil, and refined oil, which account for 5-10% of world trade, as well as bulk consumer goods such as clothing, furniture, and auto parts. According to Lloyd’s estimates, the blockade can cause huge damages of $ 400 million per hour and disruption of approximately $ 10 billion in daily shipping, not to mention that this happens during the new corona pneumonia epidemic. Fragile moment.
In addition, the Suez Canal operator claimed that the Egyptian government will suffer a loss of US $ 90 million as hundreds of ships are waiting to pass through the blocked inland waterway or have to change other routes.
The most direct losses come from damage to ships and canals. Under normal circumstances, these costs are primarily borne by the shipowner’s insurance company. As a result, a consortium led by Mitsui Sumitomo Insurance, Tokio Marine and Sompo Japan will bear the losses in this regard. Fortunately, according to the initial report, the damage to the “Long Grant” was not serious and there was no leakage of contamination.
The bill also includes other unexpected expenses. As the experts and the rescue team are mobilized in a short time, the cost of the rescue labor is also increasing. Experts predict that the shipowner’s insurance company can take on this responsibility. Fitch Ratings insurance analyst Robert Mazzuoli estimates that despite many variables, it could cost tens of millions of dollars in this regard.
The more difficult question is, how will the different types of property be claimed? The company that ordered the containers on the Long Grant, and the 400 ships that had to wait in line outside the canal when the canal was crowded, may plan to file a claim. Although most insurance policies do not cover economic losses caused by cargo delays, the special circumstances of the Suez Canal will add another dimension to the complexity of compensation. According to market estimates, the number of such claims can run into the hundreds of millions of dollars.
Under the global flow of goods, the Suez incident also added a hardship to the insurance industry, causing the insurance industry to consider how to deal with the increasing risks of transoceanic bulk cargo transportation.
Cana noted that insurance companies have been warning for many years that increasing ship sizes will lead to higher risks. These concerns are now becoming a reality, hurting insurance companies’ long-term improvements in safety and risk management.
“Although this type of vessel brings economies of scale to shipowners, once problems arise, the cost burden will be disproportionately high.” He said: “Insurers are dealing with accidents involving large ships in fires, stranded and collisions with which China must deal with increasingly complex situations and higher costs.”
“Today, fires on large container ships occur frequently. Such incidents can easily lead to huge claims of hundreds of millions of dollars. If you include the cost of a complex salvage and any environmental claims, it is assumed that two large container ships or a container In the worst case scenario where the ship collides with a cruise ship and ran aground, the loss could reach $ 4 billion, “said Kana.
In his opinion, the size of the ship will significantly increase salvage and overall average costs. “Large ships require professional tugs, and it is also very difficult to find a port of refuge capable of accommodating large ships like the Long Give, which will greatly increase the cost of salvage operations.”
“It is obvious that in some shipping departments, the loss prevention team has not kept pace with the ship upgrades, and this is an issue that needs to be resolved from the design stage.” Cana said: “At this special event, there is no doubt that insurance companies and other institutions will gain valuable reference experience in piloting and handling large ships in the Suez Canal, especially when storms are hindered. of sand and other visibility “.
(Author: Hu Tian Jiao, Li Zhihong Editor: Horse Spring Garden)
