Insured losses from Evergreen container ship 'should remain manageable': DBRS
Insured losses related to the Evergreen container ship Ever Given should remain manageable, according to DBRS Morningstar.
In a report titled The Suez Canal Blockage Is Likely to Have a Limited Impact on the Global Insurance Industry, DBRS said the relatively short duration of the blockage will likely limit the impact on the industry.
The container ship, which ran aground in the Suez Canal, blocked passage through the waterway for almost a week, with traffic resuming on March 29, 2021. According to DBRS, 18,829 ships with 1.17 billion net tons of cargo crossed the Suez Canal in 2020, representing more than 13 percent of global maritime trade.
The low prevalence of delay cargo insurance and the frequent use of deductibles in marine policies will also mitigate the impact, DBRS said.
Marcos Alvarez, senior vice president and head of insurance at DBRS, said the incident could affect multiple insurance policies given the complexities of marine insurance and the number of parties involved. Marine insurance coverages such as hull and machinery (H&M) and protection and indemnity (P&I) were cited as among those most likely to be impacted.
“The first consideration is whether the ship itself sustained damage when it ran aground or during salvage operations,” he said. “In DBRS Morningstar’s view, litigation is likely to ensue to determine legal responsibility for the Ever Given blocking the canal. As of now, indications are that the responsible partners would include the owner of the ship, its operator, and the Suez Canal Authority, which requires local pilots to guide ships through the canal.”
DBRS cited marine insurance brokers who said container ships like Ever Given would typically have H&M insurance limits in the $100-$140 million range, with the upper limit applying to a total loss, which is unlikely in this case.
The H&M insurance policy would also cover the cost of salvage operations. P&I provides a second layer of coverage, covering practically all maritime liability risks associated with the ownership and operation of a ship.
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